- A shortage of stock and high demand for houses has led to a big increase in Australia’s rental prices
- National rental rates are 8.9% higher year-on-year, the highest annual growth in dwelling rents since July 2008
- Mr Lawless expects rents to rise nationally in the foreseeable future
A shortage of stock and high demand for houses has led to a big increase in Australia’s rental prices, despite quarterly growth rates starting to ease in the three months to September.
CoreLogic’s recent quarterly Rental Review shows the national rental index increased 1.9% during the September quarter compared to a 2.1% rise in the June quarter.
National rental rates are 8.9% higher year-on-year, the highest annual growth in dwelling rents since July 2008.
According to SQM Research there has been an increase of 3.9% since October last year.
CoreLogic research director Tim Lawless said several factors were influencing rental growth including a desire for detached housing and lack of supply due to historically low levels of investor activity.
“Renters are clearly looking for lower density housing options, with house rents rising more than double the pace of units rents over the past year, however this trend is starting to narrow, with national house and unit rents rising at the same rate over the September quarter.
“Another factor that may be contributing to rental demand is that more renters are working from home, which could be driving a trend towards smaller rental households as tenants look to maximise their space and working environment during COVID.”
Mr Lawless said private sector investors are the largest contributor of rental housing and up until January 2021 made up 23% of housing market activity.
The proportion of investors entering the market has begun to increase with this buyer segment account for 31% of mortgage demand in August.
Regional dwelling rents rose 2.2% over the September quarter compared to capital city dwelling rents.
Regional Australia’s annual rate of rental growth by 12.5% in September 2021 is the highest annual figure on CoreLogic’s record since 2005.
Mr Lawless said, “demographic data is showing a clear trend towards regional population growth, driven by a combination of more people leaving cities for the regions, but also fewer people moving from the regional areas to the capitals.
“With regional rents rising over the past year at a time when household incomes have hardly budged, it’s likely that rental affordability is becoming a lot more challenging in some of the most popular regional markets.”
Capital city dwelling rents increased 1.7% over the September period.
The combined capital cities recorded annual rent growth of 7.5%, the highest annual growth rate for the combined capitals since January 2009.
The strongest quarterly rent growth was recorded in Brisbane (2.6%) and Sydney (2.3%), while Perth, which recorded a surge in rental growth earlier in 2021, saw rates increase 0.3% during the September quarter.
Adelaide remains Australia’s cheapest capital city for rentals, with typical dwelling rents of $440 per week compared to Canberra’s rates, which are the most expensive in the country at $633. Melbourne is Australia’s second more affordable rental market, with a typical dwelling costing $450.
Mr Lawless said, “relative to household incomes, based on data to March, Melbourne was actually the most affordable capital city to rent, with households, on average, dedicating 26% of their gross annual household income to rent a dwelling compared with the national of 28.7%.
“With Melbourne showing the largest exposure to overseas migration, at least historically, once international borders open, we could see a more substantial boost to rental demand than other cities. If this is the case, we could see Melbourne once again recording a faster rate of rental growth.”
Mr Lawless expects rents to rise nationally too in the foreseeable future.
With little increase in household incomes, rental affordability will eventually become an issue leading towards higher density rental options where renting tends to be more affordable, according to Mr Lawless.