According to the most recent rental market report from Domain, there has been a notable surge in rental prices across Australia’s capital cities. Over the June quarter, the average rent for houses in these cities climbed by $20, marking the fastest annual growth rate seen in nearly two years.
The rental landscape is poised to remain competitive in the upcoming months, influenced by shifts in government policies, low housing supply, and current interest rates, all of which are impacting rental affordability. With vacancy rates at record lows, tenants are facing a situation that favors landlords.
The Domain report indicates that Sydney experienced the most significant quarterly rent increase in four years, with house rents escalating by $50 to reach a peak of $850 per week. Additionally, Brisbane’s house rents also rose by $20 during the same period, now averaging $700 per week. Notably, Darwin has surpassed Perth to become the second most expensive city for house rentals, exhibiting the strongest annual rental growth.
Nicola Powell, Domain’s chief retail economist, commented that renters are currently navigating a market that heavily favors landlords. She attributed this trend to a combination of robust population growth, insufficient rental supply, and challenges for tenants transitioning to homeownership.
Separate data from realestate.com.au’s Market Insight report showed that the national median weekly advertised rent increased by 3.1 percent in the June quarter, reaching a new high of $670. On an annual basis, this represents a 6.4 percent rise, equating to an additional average cost of $12,480 for renters nationally compared to five years ago.
With vacancy rates nearing historic lows and housing supply remaining tight, tenants are likely to continue experiencing challenging rental conditions, as highlighted in Domain’s report. Real estate agent Tanja Cosic noted that demand for rental properties is evident in her daily experience, stating that inquiries flood in as soon as listings go online.
Cosic further remarked that the rising cost of housing has led to more individuals sharing accommodations or applying for rentals together to manage expenses. She noted that prospective tenants frequently mention roommates or family members moving in to help cover costs.
Student Heath Clark, who rents in inner Sydney, expressed the difficulties of balancing his studies and part-time work while managing rising accommodation costs. He mentioned that after accounting for essentials such as food, transport, and books, he struggles to save. His rent amounts to about $900 every two weeks, with his total income barely covering his basic living expenses.
While rental growth continues to be predominantly driven by houses, unit rents have also seen modest increases. Darwin led the unit rental market with an 8.3 percent rise, bringing weekly rents from $600 to $650, and an annual growth rate of 18.2 percent. In Sydney and Hobart, unit rents increased by 4 percent during the quarter, while Perth noted a slight increase of 0.7 percent. Conversely, Melbourne, Brisbane, Adelaide, and Canberra saw little to no change in their unit rental prices.
The report indicated that annual growth for Melbourne’s units has reached a four-and-a-half-year low. Dr. Powell explained that rental markets across Australia are diverging, with cities like Sydney, Brisbane, Canberra, and Darwin continuing to experience strong rental growth, while Melbourne, Adelaide, Perth, and Hobart are beginning to encounter affordability constraints that limit further rent increases despite low vacancy rates.
Looking ahead, the tight rental market is expected to persist. Analysts suggest that three consecutive interest rate hikes have contributed to a slowdown in rental availability. Matthew Bowes from the Grattan Institute noted that higher interest rates over recent years have deterred property investors, which could lead to reduced options for renters.
The national vacancy rate remains below 1 percent, indicating that fewer than one in 100 rental properties are available. Bowes emphasized that the ongoing supply constraints have been a persistent issue, calling for a more coordinated effort from the government to address these challenges. Dr. Powell also highlighted that it is premature to determine the impact of recent government tax policy changes on future rental prices.
