Australia remains firmly a landlords’ market.
The latest report by Domain shows Australia needs up to 70,000 rentals to balance out the rental market, which is the equivalent of nearly all the residential dwellings in the Newcastle Local Government Area.
The vacancy rate returns to a record low of 0.8%. In recent months, most cities have seen vacancy rates slide again, with Sydney and Perth at a record low, while Melbourne, Brisbane, Adelaide and Darwin are close to record lows. Alarmingly, Adelaide and Perth have had a vacancy rate below 1% for roughly 3 years with Brisbane being almost 2 years in.
House rents are at a record high across the combined capitals ($600 median weekly asking rent) and all cities apart from Canberra and Hobart.
Unit rents are also at a record high across the combined capitals ($600 median weekly asking rent) and all cities, apart from Canberra, Hobart and Darwin.
Rent growth is easing from the extreme hikes seen throughout 2022 and earlier this year. However, the pace of growth remains heightened compared to historical standards – the combined capital median house rent rose 0.4% on average throughout the 2010s and for units by 0.6% – over the September quarter, rents increased by 3.4%.
Melbourne is no longer the most affordable city in which to rent a house for the first time in just over two years, losing its status to Hobart.
For the first time, Brisbane is now the second most expensive city in which to rent a unit (jointly with Canberra) and behind only Sydney.
Australia's rental market saw another quarter of significant milestones.
According to Domain's latest rental report, asking rents continued their remarkable streak of consecutive increases, resulting in fresh record-high rents.
The median weekly asking rent for houses in the combined capital cities reached $600, marking a 13% increase from the previous year.
Similarly, unit rents also surged to $600, showing a remarkable 23% increase from the previous year.
Across different cities, the rental landscape varies. Sydney, Melbourne, Brisbane, Adelaide, and Perth all witnessed record-high rents for houses and units.
In addition, Darwin saw record-high house rents, as indicated in Table 1 and Table 2.
Although rents continued to rise in most capital cities, the pace of growth slowed during the September quarter, with the exception of houses in Melbourne and units in Adelaide, which experienced a reacceleration in growth.
Notably, Melbourne, Adelaide, and Perth led the way in terms of rental gains during the September quarter.
Conversely, Hobart and Canberra saw improved conditions for tenants. Melbourne lost its position as the most affordable city to rent a house for the first time in over two years, with Hobart taking its place.
Furthermore, Brisbane, jointly with Canberra, became the second most expensive city for renting a unit for the first time.
Dr Nicola Powell, Domain’s Chief of Research and Economics said:
"One of the potential driving forces behind the differences between the capitals is the varied supply levels and demographic shifts.
Our biggest capital cities will see the largest flows of net overseas migration, which, in part, may explain the reacceleration in Melbourne rents.
Western Australia, Victoria and Queensland have recorded the strongest population growth of all the states and territories.
These trends led to a shift in the capital cities’ affordability ranking."
Dr Powell noted that it is important to recognise that it is unusual for rent gains to decelerate when Australia’s vacancy rate is at a record low, suggesting that an affordability ceiling is being reached as strained tenant budgets cannot keep pace with escalating rents and living costs.
She further commented:
"These dynamics are likely to have led to a reconsideration of house shares or opting for a more affordable location, property type or size with recent RBA research suggesting that the average number of people per dwelling is rising.
Rental supply has suffered due to the sustained development undersupply and investors selling under holding pressure costs.
To balance the rental market and achieve a healthy vacancy rate of 2-3%, Australia needs 40,000 to 70,000 additional rentals.
There is no quick fix to ease the competitive rental market, as many factors are at play. One of the key factors is investors.
They are currently reluctant to hold debt with rising costs, as evidenced by the falling annual investor share of new lending.
Discussions of higher taxes in Queensland and Victoria will only act as a deterrent for future investors who seek certainty.
For example, the Victorian government is looking to introduce a levy on short-stay accommodation providers from 2025 onward.
While it might help boost overall supply and raise revenue for social and affordable housing, this could create negative sentiment among investors, discouraging them from entering the rental market even further.
In a time of increasing demand, policies should aim to encourage investors and not disincentive them.”
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Sydney remains Australia’s most expensive city in which to rent a house and a unit.
House asking rents rose for the third consecutive quarter to hit a record high of $720 a week.
Sydney’s vacancy rate has returned to a record low of 0.9%, last seen in March 2023.
For the first time in two years, Melbourne is no longer the most affordable city in which to rent a house.
Melbourne house and unit rents rose for the eighth consecutive quarter, marking the longest stretch of rising rents the city has ever seen.
House rents are at a record high, providing the second-fastest quarterly and steepest annual increases in the city’s history.
Melbourne’s vacancy rate has fallen to 0.9%, close to the record low of 0.8% in March 2023.
For the first time, Brisbane is the second most expensive city in which to rent a unit.
Brisbane houses saw a deacceleration of rent growth over the September quarter, rising roughly half the pace of the previous quarter.
Despite this, weekly asking rent is at a record-high median of $590.
Brisbane’s vacancy rate is edging closer to a record low, currently at 0.7%.
Adelaide houses continue the record-long stretch of rising rents following the thirteenth consecutive quarter of a rise.
Despite these consistent increases, quarterly growth has slowed to half the previous quarter's pace and the lowest increase in just over three years.
Adelaide’s vacancy rate remains close to a record low, currently at 0.3%.
Canberra house rents fell for a second consecutive quarter, marking the steepest quarterly decline in a decade and the steepest annual decline since mid-2014.
Median house rents have hit a two-year low – $35 lower than the March record – a stark comparison to its almost five-year reign as the most expensive city in which to rent a house.
Canberra’s vacancy rate is the highest of all the capital cities at 1.6%, although it has started to decline in recent months.
In Perth, it is the longest stretch of continuous rental price growth the city has recorded as house rents rise for the eighth consecutive quarter and unit rents for the fifth, pushing the median house and unit rents to hit another record high.
Perth’s vacancy rate is at a record low of 0.3%.
This lack of vacant rental supply means that Perth is one of the most competitive cities for tenants in Australia, along with Adelaide.
Hobart house and unit rents held over the September quarter, bucking the rising national trend.
The median house rent recorded the steepest annual decline in roughly a decade, while unit rents flatlined.
Hobart is now the most affordable city in which to rent a house and a unit for the first time since 2016 (jointly with Adelaide for units).
The median Darwin house rent remained steady for a second consecutive quarter at the record first achieved in 2012.
It is the most stable outcome in roughly four years.
Darwin’s vacancy rate remains close to the 2022 low, at 0.7%.