Australia is experiencing its biggest sustained rise in rents on record as house rents rose for the eighth consecutive quarter and unit rents for the seventh, the latest quarterly report from Australia shows.Sectorshows.
The March report shows Australia's rental market is firmly locked in favor of landlords as rising immigration and low supply create tough conditions for potential renters in 2023.
House rents have increased by $135 a week (or 31.4%) and unit rents by $140 (or 34.1%) since the trough of the pandemic, the report shows. These rents are at record highs in all cities and unit rents are at record highs in all cities except Canberra and Darwin.
“In the capital cities combined, we are now seeing the biggest sustained rise in rents on record, with house rents rising for the eighth consecutive quarter and unit rents rising for the seventh. For the first time since 2009, all capital cities have record house rents, indicating the rental crisis the country is currently experiencing,” said Dr Nicola Powell, Head of Sector Research and Economics.
A shift fueled by lingering affordability concerns is driving budget-conscious renters increasingly into housing. Units are seeing a steady acceleration in rental growth, particularly in Sydney and Melbourne, with Sydney unit rents breaking into the $600 range for the first time.
|Capital||March 23||22 Dec||March 22||QoQ||her|
|Canberra||690 $||690 $||690 $|
|Combined capitals||565 $||$550||$500|
|Combined areas||$500||$500||465 $|
Immigration is an important factor
The report confirms that rent increases are caused by many factors. These include demand for rental housing that has seen no sign of abating, fueled by an influx of foreign migrants, international students and temporary visa holders.
Australia's net increase in overseas migration affected almost 304,000 new people in the 12 months to September 2022, continuing to squeeze living standards. The share of foreign migrants holding temporary visas now stands at 61% – a major driver of demand for rental housing.
The impact of immigration was highlighted recently after China's Ministry of Education announced it would stop recognizing online degrees in January. As a result, Domain rental searches from China increased 124 percent in the March quarter compared to last year. It highlights the competitive nature of the Australian rental market, suggesting that the pressure on the rental market could continue, especially for cities that have traditionally had a greater inflow of residents from overseas.
Rental inventory will be lifted, but more is needed
While Australia remains a landlord market with vacant rental properties at a record low for the month of March, renters will see a slight increase in rental supply. The combined capital city vacancy rate is slightly higher than last month's low (0.8%) and in regional Australia the highest since December 2020 (0.9%).
Dr. Nicola Powell said: "With so many factors to consider, we need to see a huge shift to get the balance right between tenants and landlords. No one-size-fits-all solution can solve this rent crisis as it is a complex problem of high housing costs, insufficient investment activity and the lack of social and affordable housing.
"Increased investor activity is needed, the build-to-rent sector is moving forward, additional rental assistance is being provided to low-income households, more social housing and helping tenants transition into home ownership," he said.
According to Domain, the stability in Sydney house rents last quarter was short-lived, with rents rising again in the March quarter to reach an all-time high. However, the year-on-year result is the weakest in a year, suggesting the second-strongest rent growth is subdued. Gross rental yields for homes are at their highest since December 2020, after the fastest annual increase on record.
Unit rents hit an all-time high following the strongest quarterly and annual growth in the city's history. After its seventh straight quarter of rental gains, it marked its longest period of uninterrupted rent growth ever. As a result, gross rental yields have risen sharply to their highest since 2014.
Domain said Melbourne house and unit rents rose for the sixth consecutive quarter to match the biggest period of rental growth in 2007-2008. Rent growth has accelerated with the fastest quarterly growth in six years and the strongest annual growth since 2008.
Despite record high rents, Melbourne remains the most affordable city to rent a home in as rents have risen more sharply in other capital cities. Due to a sharp acceleration in rental demand, gross residential rental yields have risen to their highest level in three years.
Unit rents are at an all-time high following the city's strongest quarterly and annual growth. Rent growth continues to accelerate and has outpaced home rents for the fifth straight quarter, narrowing the price gap between property types to a near three-year low. Due to the sharp rise in rents, gross rental yields have risen to a high level.
The stability in Brisbane house rents was short-lived, with rents rising again in the March quarter to hit an all-time high, the report said. However, the annual result is the weakest since September 2021, suggesting that stronger growth in house rents is moderating.
Gross residential rental yields are at an 18-month high, after the fastest quarterly and annual growth on record.
Units are continuing a long record period of rising rents after the seventh straight quarter of growth, marking the fastest annual increase on record. Despite the new all-time high, the pace of quarterly change has slowed marginally. Due to continued growth in demand rents per unit, gross rental yields are now at all-time highs.
Adelaide homes are continuing a long streak of rising rents after an 11th consecutive quarter of growth, marking the fastest annual increase since 2005, according to the Domain report.
Adelaide remains the most competitive city for renters in Australia as quarterly growth accelerates to more than double the previous quarter. The improvement in rental demand has pushed annual gross rental yields for the first time since pre-pandemic to the highest level since September 2021.
The stability of rents in Adelaide last quarter was short-lived, with rents rising again in the March quarter to reach an all-time high. Unit rents are rising faster than houses as affordability affects renters. Despite the recovery, the annual result is the weakest since mid-2022, suggesting that the second-strongest growth in unit rents is slowing.
Domain says house rents in Canberra held steady in the March quarter at a record high to remain Australia's most expensive city to rent a home. The outlook remains steadier for renters, with rent growth stagnating year-on-year for the first time since September 2019. Renters will find that rental choice has grown significantly over the past year to increase vacancy levels and ease the rent pressures of recent years.
Canberra was the only capital city where unit rents fell in March. This is the first quarterly decline since mid-2020, which has reversed growth from the previous quarter and slowed annual growth to a near three-year low. Canberra is no longer Australia's most expensive city to rent a unit as Sydney rental prices soar to overtake Canberra.
House rents have risen to a record high in Perth for the sixth consecutive quarter, according to the report. Still, quarterly growth slowed by a third compared to the previous quarter, dragging down annual gains.
In the March quarter, unit rental growth doubled compared to the last quarter. This acceleration in growth has pushed rents to an all-time high for the first time since 2013.
Perth is the second most competitive city for renters in Australia. While the rental option has increased recently, it remains significantly lower annually, keeping vacancy levels near historic lows. More investment activity is needed to ease current conditions. Not only does Perth offer investors Australia's second highest yielding capital, they are also at a record high for Perth.
According to Domain, Hobart house rents bucked the national trend to become one of two capital cities to turn flat in the March quarter to maintain last quarter's record. The flat result slowed annual growth to the lowest level in two years.
Unit rents rose again to a record high, but the quarter-on-quarter growth rate halved from the previous quarter and year-on-year increases slowed. Tenants will notice that the larger rental selection helps ease rental conditions.
While Hobart remains a landlord market, vacancy rates have risen to their highest point since mid-2020, suggesting that extreme rental conditions for tenants are beginning to improve.
article and photos from thepropertytribune.com.au