Following a slowdown at the end of 2022, new data from CoreLogic and PropTrack indicates a reacceleration of rental growth occurred during the first three months of the new year.
According to CoreLogic’s Quarterly Rental Review for Q1 2022, national rents jumped 2.5 per cent in the three months preceding March. Similarly, PropTrack’s latest Market Insights research puts the pace of rental increase during the opening quarter of the new year at 2 per cent.
CoreLogic economist, Kaytlin Ezzy, noted March’s rental trajectory “won’t be welcome news for those tenants already struggling to find affordable accommodation in our capital cities.”
Vacancy rates rebounded to 1.1 per cent in March, led by a record low figure of 0.9 per cent in Australia’s capital cities, having been recorded at a record-low 1 per cent a month earlier, with a “chronic undersupply of advertised rental stock” across large parts of Australia translating into tighter conditions.
Over the March quarter, CoreLogic found capital city rent growth (3 per cent) doubled the pace of rental growth in the nation’s regions (1.2 per cent), with Ms Ezzy explaining growing migration has contributed to the capital city reacceleration.
Similarly, PropTrack’s data suggest Australia’s capital city rents jumped 4 per cent in the three months to March, as opposed to 2.2 per cent across its regional markets.
Despite remaining the country’s most affordable rental market, Melbourne led the charge for quarterly rental increases (3.7 per cent) leading to a median weekly rent of $526 per week in the Victorian capital, according to CoreLogic.
“Weaker rental demand due to extended lockdowns and closed international borders saw Melbourne’s relative rental affordability improve through the first two years of COVID,” Ms Ezzy said.
“However, since overseas migrants and international students have returned and they typically choose to rent in Melbourne and Sydney, the pendulum has swung the other way.”
As a result of Melbourne’s upwardly trending rents, the gap between it and the second most affordable market, Adelaide, has closed from $15 per week in December to $5 per week last month.
Following the Victorian capital’s lead, rents also jumped in Perth (3.6 per cent), Sydney (3.4 per cent), Hobart (1.8 per cent), and Adelaide (1.7 per cent), while growth in Brisbane eased from 2.2 per cent in the December quarter to 1.8 per cent in the three months to March.
Moreover, rents dropped 1 per cent in Darwin and 0.7 per cent in Canberra, which saw the national capital lose its place as the nation’s most expensive rental market to Sydney, where the median weekly rent is $699, compared to $674 in Canberra.
Widening the data pool, CoreLogic found every rest-of-state region experienced rent increases in the first quarter of the new year, led by regional South Australia recording the largest rise during the period (2.3 per cent), followed by regional Western Australia (2.2 per cent), regional Queensland (1.4 per cent), and regional Victoria (1.2 per cent).
More modest increases were seen in the rest-of-state regions of Tasmania (0.1 per cent), NSW (0.7 per cent), and the Northern Territory (0.9 per cent).
In line with rental increases, gross rental yields also rose by 10 basis points in Q1 to 3.88 per cent, with the regional Northern Territory as the only market to not register both a quarterly and annual yield increase.
Ms Ezzy said, “The yield recovery period to date has been fueled by both falling values and rising rents. However, with the CoreLogic national HVI recording a rise in dwelling values over March, the upwards trend in yields will likely continue to rise.”
Moving forward, the persistent imbalance between national supply and demand means short- to medium-term relief is unlikely for tenants, especially with stock levels unlikely to increase.
“Tenants coming up against affordability constraints have limited opportunities and unlike home owners, can’t borrow to pay rent,” she said. “It’s likely some tenants are now sacrificing the spare room or home office and re-forming share houses.”
Ms Ezzy added that “net migration is forecast to remain strong for some time yet and this will only add further upwards pressure on rental values.”
In addition to data provided by both CoreLogic and PropTrack, industry heavyweight Domain released their Rent Report for the March quarter, which found house rents are at record highs in all Australian cities for the first time in over a decade, while unit rents are at similar levels everywhere bar Canberra and Darwin.
Network chief of research and economics, Dr Nicola Powell, explained Australia’s rental crisis is highlighted by “the longest stretch of continuous rental price growth on record” across the combined capitals, following eight and seven consecutive quarters of house and unit rent growth respectively.
Since pre-pandemic, house rents are up $135 per week in Australia’s capitals, while regional renters are parting with $140 more a week compared to the months prior to March 2020.
Playing into such increases is heightened demand, which has risen since 2021 as overseas migrants and international students have begun returning to Australian soil in droves. This is ratified by data suggesting 304,000 new people entered the country in the 12 months to September 2022.
Dr Powell noted the Chinese government’s decision to not recognise online university degrees earlier this year resulted in rental searches on Domain originating from China surging 124 per cent over the March quarter compared to last year.
“With more demand for rentals and not enough supply, renters will continue to face limited choices and tough competition, particularly for cities that traditionally see a higher intake of residents like Sydney and Melbourne,” she said.
She called for a “massive change to strike the right balance between tenants and landlords,” outlining how “no single solution can fix this rental crisis,” due to the myriad of conditions creating it, including “the high cost of housing, insufficient investor activity, and the lack of social and affordable housing.”
Along with increasing investor activity, Dr Powell concluded the advancement of the build-to-rent sector, as well as “additional rental assistance provided for low-income households, more social housing, and assisting tenants transition to home owners” is necessary to facilitate an easing of the nation’s rental crisis.