The nation is in the grips of a severe rental crisis, with vacancy rates and supply falling sharply while rents go the other way.
CoreLogic’s Quarterly Rental Review for the second quarter of 2022 paints a very grim picture of the national rental landscape, showing the national rental index as having increased 0.9 per cent in June and 2.9 per cent in May.
When compared to June 2021, dwelling rents are up 9.1 per cent in the capital cities and 10.8 per cent in regional areas, with CoreLogic research analyst and the author of the report Kaytlin Ezzy stating that in the absence of international migration, the current conditions are mainly down to supply shortages and high demand.
“This sustained period of strong rental growth has seen national dwellings record the highest annual growth in rental values since December 2008, when rental demand was supported by record levels of international migration,” she said.
Such is the nature of current national supply shortages; CoreLogic is reporting vacancy rates have fallen to a record low of 1.2 per cent, compared to 2.2 per cent this time last year. This drastic decline has been facilitated by declines in available rentals in every capital barring Canberra.
Ms Ezzy detailed how these supply shortcomings are impacting the market, with June’s rental listings 34 per cent below the country’s long-term average for this time of year, which has seen capital city rents climb 3 per cent in the June quarter, while in the same time regional rents have risen 2.7 per cent.
Darwin was the only capital city to record rent growth below 2 per cent, while Adelaide’s quarterly increase of 4.3 per cent is its strongest growth rate since CoreLogic’s records began in 2005.
In line with this jump, Melbourne overtook the South Australian capital as the most affordable city nationwide, with median rents $480 per week, compared to Adelaide’s $492, while Canberra remains the country’s most expensive rental market, with $690 the average weekly asking price, followed by Sydney ($643).
CoreLogic’s research director Tim Lawless believes that as migration begins to increase, so too will rental demand.
“With the exception of Darwin, the strong rental growth seen over the past year has led dwelling rents across all of the capitals to reach new record highs,” he said.
“Despite growing affordability concerns, rental markets are expected to remain tight for some time yet partly due to a shortage of supply following a long period of investment activity between 2015 and 2021, but also due to a renewed rental demand as international migrations recover.
“Worsening affordability could have a negative impact on rental demand as more people try to minimise costs by maximising occupancy rates or reforming larger households. However, this will likely be offset by additional rental demands as international migration returns to pre-COVID levels.”
Coinciding with rental increases, dwelling rental yield also grew to hit 3.33 per cent, 12 basis points above the record low of 3.21 per cent seen in January.
However, Ms Ezzy did affirm that “despite the recent rise, gross yields are still slightly below the levels recorded this time last year and below the five-year average.”