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Rental growth eases, but prices remain above average levels

By Zarah Torrazo
11 July 2023 | 11 minute read
kaytlin ezzy corelogic 2 reb ngrouk

A new report shows rental price growth across capital cities eased in the latest quarter, but persistent demand — driven by high migration rates and chronic housing supply shortages — kept rental prices above long-term averages.

National rent prices have risen by 2.5 per cent in the three months to June, slowing down from the 2.8 per cent increase recorded in the quarter to May and marks the first slowdown in quarterly rent growth since November last year.

This deceleration in national rental appreciation becomes more evident when analysing the annual trend, as national rents rose by 9.7 per cent over the 2022-23 financial year, down from the record 10.2 per cent increase observed through the previous 12-month period.

CoreLogic economist Kaytlin Ezzy said despite the slowdown in the pace of national rental growth now clear across the monthly, quarterly and annual trends, rental growth remains “well above average.”

“The softening in rental growth occurred in spite of an ongoing surge in overseas migration and a continued shortage in rental supply, suggesting an increasing portion of tenants are reaching their affordability ceiling,” Ms Ezzy said.

Across the individual capitals, Melbourne continues to lead the pace of quarterly rental growth, with dwelling rents rising 3.9 per cent in the quarter, followed by Perth (3.4 per cent), Sydney (3.2 per cent), Adelaide (2.5 per cent), and Brisbane (2.1 per cent).

Rents across Darwin rose just 0.7 per cent over the quarter, while both Hobart and Canberra saw rents decline by -1 per cent.

The NSW capital remained the most expensive capital city for renters in the June quarter, with the average weekly price of rents costing tenants $733.

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Meanwhile, Adelaide has replaced Melbourne as the country’s most affordable rental capital, with the typical dwelling renting in the national capital now priced at $549 per week compared to $551 per week in Melbourne.

But Ms Ezzy noted the South Australian capital could soon lose its new title to Hobart given a gap of just $3 per week separates the cities’ rental markets if Adelaide rents continue to rise while rents in the Tasmanian capital continue to fall.

Data also showed strong demand for the more affordable units and apartments saw a 3.6 per cent increase in the June quarter for average unit rents, compared to a 2 per cent rise in median house rental prices.

Ms Ezzy noted the continued preference for unit rentals has seen the gap between median house and unit rents narrow from $62 in December 2021 to just $34 in June.

And while she forecasts rental demand from overseas migrants is “likely to remain strong for some time yet,” especially across the largest capitals, she revealed there has already been an observed reduction in domestic rental demand via an increase in the average household size.

With national rents 27.4 per cent higher since the onset of COVID-19, equivalent to a $127 per week increase on the median dwelling rent, the expert further predicts: “It’s likely there will be an increase in average household sizes as more renters re-form share houses as a means of sharing the increased rental burden.”

CoreLogic’s data showed vacancy rates also eased during the June quarter, rising from 1.1 per cent in the March quarter, to 1.2 per cent in June.

However, the figures remained well below pre-pandemic levels of a 3.3 per cent average over the decade.

Recent data from Flatmates.com.au has revealed that the nation’s rental crisis and subsequent scarcity of available rentals that has vacancy rates across a large portion of the country sitting below 1 per cent meant a record number of members (69,400) joined the site in May.

According to Claudia Conley, Flatmates community manager, the increased demand for Australia share houses has occurred over the past six months, with traffic on the site “starting to increase in October last year and has not died down, even after our usual ‘peak season’ ended at the end of February.”

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