While housing prices have fallen nationwide against the backdrop of a sharp rise in interest rates, rental prices have soared, and the situation continues to be difficult for tenants.
September saw the highest quarterly rate of rent growth nationwide, as average weekly rents for all residences surged 4.3%.
Average weekly rent in Australia has increased for the first time in 23 months since April 2020, to $520 for residential homes. For units, the median weekly rent is currently $450.
Since the outbreak of Covid, home rents have risen 19%, well above unit rent growth of 8.4%. This is not surprising given that remote work and lockdowns have increased the desire for more space.
This trend has continued over the past year, with rents rising 11.1% and units rising just 7.1%. However, in the past quarter, weekly rents for units have surged in Sydney (up 4.%) and Melbourne (up 5%).
Booming demand and declining supply make it a daunting prospect to be a renter in many parts of the country.Photo: Getty
This far outstrips housing rental price growth as overseas migration and international student arrivals pick up.
These pressures are disproportionately affecting young Australians, with more young people leaving for rent, a proportion that is steadily increasing.
Homebuyers have regained the upper hand from sellers, but it’s certainly not the renters’ market. With demanding applicants and strong pressure on rental prices across the country, it’s not only difficult to find a home, but it’s becoming increasingly difficult to find one “on a budget.”
Rents are rising rapidly as a limited supply of available properties goes hand in hand with rising demand, and many factors have contributed to this record tightness in the rental market.
The popularity of share houses has waned in recent years thanks to remote work and Covid-related restrictions previously in place, and rental demand has increased in part due to shrinking household sizes.
The decline in household size is part of a broader trend toward aging populations and couples forming families later in life.
However, the 2021 Census identified that the average number of people per household decreased from 2.594 in 2016 to 2.541 in 2021. Percentage of people living alone increased, contributing to an increase in rental demand.
For example, a previously locked down employee who was probably looking for a home office space suddenly started looking for a new rental property as a single or much smaller household.
Currently, in addition to demand pressure, Strong recovery in net emigration and international student arrivals.
The number of highly engaged potential renters per realestate.com.au listing in urban Melbourne has more than doubled in the last 12 months, with parts of Sydney also seeing significant increases .
or Increased demand for rentals collided with extreme shortages of rental inventorythe total number of rental properties nationwide is now more than a third lower than pre-pandemic levels.
Compared to the pre-pandemic average, total rental supply is particularly tight in Perth (down 65%), Darwin (down 54%), Adelaide (down 50%) and Brisbane (down 49%).
The constraint on rental supply is Decrease in investment activity Investor sales have increased amid strong capital gains, and properties are moving from long-term rental pools to short-term contracts via platforms like Airbnb.
These changes are evident in rental price pressure
Demographic trends and changing tastes are manifesting in extremely tight supply as well as pressure on rental prices. Four-bedroom homes (up 12%), five-bedroom homes (up 11.4%) and one-bedroom units (up 11.1%) have seen the most rent increases over the past year.
So let’s dig into what’s happening in the rental market for different types and sizes of residences.
Shrinking household sizes and demand for space are evident in rental price trends, with populations moving north to Brisbane, the Sunshine Coast and the Gold Coast.
Brisbane had the strongest rental growth last year, with prices rising 14.1%. By property type, Brisbane homes saw weekly rents rise 16.7% year-on-year, with Queensland posting the biggest gains, up 11.5%.
Adelaide unit rent increases followed suit, rising 11.4%.
But in the last quarter, Melbourne posted the biggest rent increase of any capital city (up 3.5%), with Brisbane (up 3.2%) coming in close behind.
And across property types, quarterly rental price increases were most pronounced for regional Western Australian homes (up 6.7%) and units in Melbourne (up 5%) and Sydney (up 4%). Her two latter trends show increasing demand from international arrivals, who usually rent in inner city areas.
Shrinking household sizes and desire for space are clear
Over the past year, tenants who want larger spaces or smaller homes to themselves have recorded the biggest increases in rents for larger homes and smaller units.
Across the capital, Adelaide (up 30%) and Hobart (up 26%) had the highest annual rent increases for homes with five or more bedrooms. Rural Queensland saw strong growth in 4 bedroom homes (+17.1%) and 5+ bedroom homes (+19.2%).
Prices for one-bedroom units in Tasmania rose significantly by 18.2%.
Looking at unit rents across the capital over the past year, Sydney (up 13.3%) and Brisbane (up 12.9%) saw the strongest increases in three-bedroom units and above.
Demand for smaller units is growing in both Sydney and Melbourne, with Sydney rents continuing to rise in the September quarter for one-bedroom units (up 6.7%) and two-bedroom units (up 6%). The number is increasing rapidly, and the unit price of one bedroom is also rising. 6.1% increase in Melbourne.
The resurgence of international migration since the reopening of Covid-locked borders and the resurgence of international students returning to Australia will drive this increase in city-based demand.
Adelaide’s 5+ bed homes continued to see strong growth of 11.4% through the September quarter, also the strongest rise in the capital’s residential mix.
These surges point to a changing preference for larger homes, but also to an increasing proportion of people living alone.The latter could also be a by-product of pressure on rental prices. This has been prevalent for months, and may have increased demand for cheaper one-bed units.
Is there any prospect of relief for the lessee?
New lending data released by the Australian Bureau of Statistics show investor activity has increased from Covid lows but has fallen again recently as interest rates rose sharply.
Current investor activity is unlikely to be at a level that would significantly increase the supply of rental stocks.
As net migration continues to pick up, it is unlikely that price pressures in the capital will ease any time soon, as a significant increase in rental supply is not imminent.
Rising rents have a huge impact on household balance sheets.
Rent growth is likely to slow as tenants face budgetary constraints. Rising costs of living and pushing some back into larger households through shared living arrangements could ease demand pressure somewhat.
Increasing the pool of long-term rentals through increased investor activity and construction into rental projects could help alleviate the supply crisis.
The good news for potential investors is that rental yields are rising and property price appreciation is slowing. Rent growth continues to be strong and is expected to continue.