By.  Ray Sparvell
05.May.2023 

A number of Canberra suburbs may have provided an affordable haven for tenants in the past, but a recent spike in asking rents has caused quite a stir, figures have shown.

The Domain Rent Report for the March quarter revealed the median asking rent for a house in Holt increased by 15.6 per cent over the year to $520 a week, while the median asking rent for a house in Pearce increased by 15.4 per cent over the year to $750 a week – the strongest rent price growth across all Canberra suburbs.

Units in O’Connor recorded the third strongest rent price growth, up 15.2 per cent to $550 a year, followed by units in Mawson, up 14.9 per cent over the same period to $500 a year; and units in Narrabundah, up 14.3 per cent to $600 a week.

However, despite these big-ticket price hikes, Canberra’s overall median asking rent for a house actually remained stable over the year at $690 a week.

That stability has been further reinforced by the capital’s vacancy rate, which reached 1.7 per cent in April, according to the latest Domain Vacancy Report.

The ongoing increase in vacancies is good news for prospective tenants as more supply can flag potential downward pressure on prices.

Property manager Grace Hooper of Someday Property says the market has definitely quietened, led by an unusual start to the year.

“There’s usually a big influx of people transferring or relocating to Canberra at the beginning of the year,” she says.

“That just didn’t happen this year and that has been followed by an increase in listing days on the market and in the number of applications received.”

Hooper says properties can now be on the market for two weeks or more – up from as little as two days in previous years.

“And there are generally fewer groups at inspections with fewer applications,” she adds. “There’s still plenty of demand, but more supply and, therefore, more choice for renters.”

As the rental market continues to shift, Hooper says the key factor in the market’s performance is “the lack of affordable rentals”.

Canberra tenant Steph Lentern considers herself fortunate to have recently secured a neat, one-bedroom, courtyard townhouse in Page. She came to the capital from Tasmania as a university student and has now been renting for five years.

“I was in my last rental in Belconnen for two years, but was keen to find a place to live by myself,” she says. “I began early research on what was available and focused on what I could afford.”

Lentern says she spent about four weeks inspecting 15 to 20 properties and encountered wild fluctuations in competition from fellow renters.

“On some inspections, it could be really packed, but on others, there might only be one or two groups beyond me,” she says. “The main challenge wasn’t availability – it was affordability.”

While Lentern applied for several properties, the Page option was the first to respond and she couldn’t be happier.

“I have my own space. I can work from home and I have a courtyard. It feels like a home,” she says.

A number of factors are at play within the diametrically opposed stories of overall stability and high rents.

Steve Lowe of Agent Team Canberra says a significant increase in rents might, in part, be attributed to an increase in new properties coming to market as opposed to lease renewals, as rent increases in the ACT are constrained to a maximum of 10 per cent above CPI.

“A landlord can set the rent at whatever the market will bear if they are bringing a new property to market, and, of course, there are many brand-new units becoming available for the first time,” he says.

“Property owners are trying to maximise their returns as they are sustaining almost monthly interest rate hits along with other input costs like land tax, body corporate fees, rates, maintenance and more.”

Lowe says residential rental yields are becoming increasingly less sustainable and that may lead investors to consider quitting the market.

“If that extra supply is then taken up by owner-occupiers, then a reduced rental pool could put new upward pressure on future asking rents,” he says.

By Alice Piper
15 May 2023

 

Australia is facing its tightest-ever rental market, with rental prices at the end of March 2023 sitting at a median of $500 per week in capital cities, an increase of 11.1% over the past 12 months.

To put this increase in perspective, rents had increased by just 4.7% over the prior year, and the national rental vacancy rate is now sitting at just 1.5%.

“I’m paying the highest rent that I’ve ever paid before, “ Melbourne renter Georgette Oakley said.

“The cost of living, bills, food … it makes it even more stressful. I’ve even gotten a part-time job on top of my full-time job just to help out a bit.”

Fellow renters are also feeling the pinch with rental increases on existing leases making their homes no longer viable and forcing some to look elsewhere.

“They ended up increasing our rent by $95 a week, which is just completely unattainable,” renter Katrina Crouch said.

“Once we averaged that out over the period of a year, it ended up being cheaper to move.”

What’s causing higher rents?

A sharp increase in the cost of living, as well as an increase in interest rates, a return of international students and migration has filtered down to renters more than other members of society.

“It’s not just the mortgage,” said landlord Sayanti Srakar.

“It’s the water rates, the council rates, and a lot of other things that add up.”

“We’ve increased the rent by $20 a week because our interest rates have gone from 3.5% to 5% or higher.”

Ms Oakley said that while she understands landlords need to cover the cost of the mortgage, raising rents can be financially stressful for tenants.

“It’s hard because your salary doesn’t increase to cover the extra rent, so you have to make ends meet elsewhere,” she said.

Another reason rental prices have seen an increase is due to supply and demand.

At the end of March 2023 there were only slightly more new rental listings coming to market than there were a year ago (+2.2%). But despite the small increase, new rental listing volumes remain historically low.

The 2.2% increase in new rental listings marked the first time since December 2020 that there had been a year-on-year increase in new rental listings. This highlights just how tight the supply of stock available for rent has been.

In fact, the biggest year-on-year declines in total rental listings in March 2023 were in Melbourne (-32.6%), Sydney (-18.2%) and Perth (-15.8%).

The demand and supply dynamic, as it stands, is seeing renters like Ms Crouch engage in ‘rental bidding’ to ensure a roof over their heads.

“I’ve had to offer more rent on my current place,” she said.

“You almost have to budget $50-100 more than the listed price to compete with other people who want the same property.”

Where are the biggest rental increases?

The largest quarterly increases in advertised rents were recorded in Perth (8.7%), regional WA (6.7%) and regional NT (6.7%).

Each capital city and regional area recorded an increase in advertised rents over the year to March 2023.

The largest increases were in Brisbane (15.6%), regional WA (14.3%) and Adelaide (13.3%), with regional NT (4.3%), Canberra (4.3%) and regional Queensland (6.4%) seeing the smallest increases.

Can anything be done to bring down the cost of living?

Rental pressures continue to mount in Sydney, Melbourne and Perth. With migration lifting significantly, and investor and first-home buyer purchasing remaining low, it is becoming increasingly competitive to find rental properties.

The biggest strain on the rental market is the lack of new rental supply. Investors are exiting the market at a greater rate than new investors are entering.

Although there is a lot of housing supply under construction, most has been targeted towards the owner-occupier market rather than investors, unlike previous construction booms.

Absent a return of investors to the market or a big increase in first-home buyer numbers, it seems unlikely that the strong demand and insufficient rental supply will be rectified any time soon.

However, that hasn’t left renters like Ms Oakley feeling down and out.

“I am positive and hopeful things will get better and I’ll get back on track,” she said.

“It’s just hard to tell how near or far in the future that will be for me, so for now I’ll just keep juggling things, which is all I can do.”

But even with a positive attitude, many renters are likely to respond by choosing more affordable options.

This will mean opting for a unit rather than a house or moving into share houses rather than an individual property.

Even with these changes, the cost of renting in a capital city looks set to continue to rise.