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A “glimmer of hope” is finally on the horizon for renters, with the December quarter seeing rental asking prices across Australia break their rising streak.
Weekly asking prices for rents in December 2023 have stayed steady for the first time in 10 quarters, breaking the longest ever streak of rises in Australian record.
According to Domain, the nation’s median asking rent for both houses and units is sitting at a record high of $600 per week as of December 2023.
Despite every capital city – with the exception of Canberra houses and Darwin and Hobart units – recording its highest ever rents, Domain chief of research and economics Dr Nicola Powell stated that extreme rent hikes are losing traction.
“The rental market may have turned a corner over the December quarter,” said Dr Powell. “Conditions are easing and rental price growth is slowing.”
One of the largest factors behind the slowdown in rental growth is stretched affordability, with Dr Powell explaining that “more renters are opting for house shares” in the wake of skyrocketing rents.
“We are also likely to see some renters transitioning to home ownership with the new first home buyer incentives in place, such as Queensland doubling the first home buyer grant and the anticipated federal government’s ‘Help to Buy’ shared equity scheme,” Dr Powell said.
A “potential interest cut” in 2024 could also encourage renters to become home owners by freeing up borrowing capacity and improving mortgage affordability.
“We forecast a tipping point to be reached at some stage this year, making a return to a more balanced rental market.”
Rental supply also improved in December thanks to a seasonal boost in stock. Sydney, Melbourne and Brisbane each recorded their highest vacancy rate in 12 months, at 1.3 per cent, 1.2 per cent and 0.9 per cent respectively.
Darwin saw its vacancy rate hit a 3.5 year high of 1.7 per cent, while Canberra reached a vacancy rate of 2 per cent – the highest ever recorded in the city.
However, it is not all good news: Perth and Adelaide continue to have concerningly low vacancies of just 0.4 per cent each.
To reach a balanced market, Australia now needs between 30,000 and 60,000 additional homes, a number which Domain stressed is “a significant improvement from September’s estimate”.
Looking forward, Dr Powell confirmed that increasing the nation’s housing supply is the only way to ease rental affordability for good.
She stated: “To help alleviate Australia’s housing crisis long-term, further solutions need to be activated, such as build-to-rent. With the cost of home ownership becoming more and more expensive in major cosmopolitan cities, it can act as a key circuit breaker for housing affordability.”
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