By Emily Hutchinson
Published on 26 Oct 2022,
A combination of low rental stock and high demand continues to drive prices up across the country and experts say there’s no relief in sight, especially for tenants in capital cities.
PropTrack’s latest Rental Report for the September quarter shows rental prices have increased at the fastest quarterly rate on record, surging by 4.3% in the past three months to reach a national median of $480 per week.
“Australia’s rental market remains extremely tight, with vacancy rates and supply reducing further over the September 2022 quarter,” PropTrack’s director of economic research Cameron Kusher said.
“As a result, rental prices nationally continued to climb.”
The higher rental prices are partly driven by low levels of available stock, with the total number of rental listings on realestate.com.au having decreased by 20.5% year-on-year, which is the lowest level since mid-2003.
That limited stock has coincided with an 18.8% surge in demand over the past year. As a result, the rental vacancy rate is just 1.6% nationally.
New properties tend to be snapped up quickly, Mr Kusher said, prompting tenants to pounce with a rental application ready to go.
In September, properties spent a median of just 19 days on realestate.com.au before being leased.
Investors feeling unmotivated
Low rental stock is largely caused by the lack of investors active within the market, with mortgage lending trending down. New lending to investors in August 2022 was $8.9 billion, which is the lowest it’s been since June 2021.
“While there is some supply coming via build-to-rent, any additions are likely to be well and truly outweighed by the increase in demand from the re-opening of international borders and the ongoing decline in purchasing by first-home buyers,” Mr Kusher said.
“With fewer investors purchasing homes to rent out, the limited supply of stock, coupled with strong demand, is leading to heightened increases in advertised rental prices.”
City-based tenants most impacted
As tenants return to cities post-Covid, the impacts of low stock and rising prices are being felt most acutely across the capitals.
In the combined capital cities, rents increased by 3.2% over the quarter, while rents were unchanged in regional areas.
The biggest year-on-year declines in total listings were seen in Sydney, down 24.2%, Melbourne, down 32,8%, and Brisbane, down 22.7%.
At the same time, these cities experienced the strongest increases in demand per listing, with Melbourne up 45.8%, Sydney up 26.8%, and Brisbane up 25.9%.
“The growth and tightness in the rental market appears to be shifting from regional areas back to the capital cities,” Mr Kusher said.
“This is being driven by the return of many people who migrated regionally during the pandemic back to capital cities and the lift in overseas migration. This is especially the case in our two biggest rental markets, Sydney and Melbourne.
“Most overseas migrants to Australia settle in these cities with few purchasing a property before arrival, which is likely to keep demand for rentals heightened as the supply of rentals is expected to continue to recede, pushing prices higher.”
The future is not so bright
Without investors, and with large numbers of renters descending on the market, there’s no easy solution to the current rental crunch in sight, Mr Kusher said.
It’s likely tenants will see prices continue to rise, especially in the cities.
“These demand and supply issues can be addressed but none of these factors appear set to change in the near term, which means a further tightening of rental supply and increases in rental costs seems likely over the coming year.”