- High rent levels are expected to persist until 2025
- While rental affordability has deteriorated across the board, the trends vary between cities and regions
- NHFIC's third State of the Nation’s Housing 2022-23 research report was released this week
Unexpectedly strong rental growth has propelled the projected rental growth for 2022 and 2023 with high rent levels now expected to persist until 2025.
This finding was released in the National Housing Finance and Investment Corporation (NHFIC)’s third State of the Nation’s Housing 2022-23 research report this week. The research explored the rental market in Australia and found strong variation in rental affordability between the greater city and regional areas.
Contrasting cities and regions
While rental affordability has deteriorated across the board, the trends vary between cities and regions. During the pandemic, rental affordability in regional areas and smaller cities experienced a considerable decline.
For instance, in Sydney, the rent prices in several outer Local Government Areas (LGAs) have risen by over 30% since the onset of the COVID-19 pandemic in early 2020 up until January 2023. Growth seen in these outer LGA areas is more than three times the increase in some inner-city Sydney LGAs.
Growth in the regions was bolstered by the tree change and sea change trend that saw many flee from cities.
More recently, the tables have turned as rent growth falls in more regional areas while certain large cities are seeing a notable increase in rent growth.
These findings suggest the premium attached to living in major cities in close proximity to job centres may be returning.
Pressures on the rental market
NHFIC Chief Executive Officer Nathan Dal Bon says the analysis shows housing
affordability and supply are likely to remain challenging for some time.
“The outlook for affordability will remain challenging, but mixed. Substantial pressure on rental affordability is likely across many cities in the short term as immigration increases.”
NHFIC Chief Executive Officer Nathan Dal Bon
Sydney and Melbourne renters are likely to be disproportionately impacted by the increased pressure on rentals.
The rapid return of overseas migration together with a supply pipeline constrained by decade-high construction costs and significant increases in interest rates is exacerbating an already tight rental market.
