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.