Australia’s rental market has regained momentum in the first quarter of the year, with the growth in rents reaccelerating after slowing down in the latter half of 2022.
According to CoreLogic, the national rental index rose 2.5% in the March quarter while vacancy rates tightened to a near record low of 1.1%.
CoreLogic economist Kaytlin Ezzy said while the annual growth trend in the rental index is just holding steady, it remains “stubbornly” high at 10.1%, which equates to an extra $54 per week or $2,727 per year.
“The reacceleration of Australia’s rental market won’t be welcome news for those tenants already struggling to find affordable accommodation in our capital cities,” Ms Ezzy said.
“There’s already a chronic undersupply of advertised rental stock in many parts of the country that’s translated into record low vacancy rates across most capitals.”
Over the four weeks to April 2, the total number of rental listings fell to just 95,000, which is 17.3% below the record levels recorded over the same period in 2022 and 36.3% below the five-year average.
In terms of housing type, units outpaced houses in rental growth.
This was evident across the largest capitals, boosted by the demand from overseas migration.
At the national level, unit rents rose 3.9% over the quarter, while house rents increased 2%.
“Rental growth conditions across the capitals were likewise skewed towards the medium to high[1]density sector, with each city recording a larger quarterly and annual increase in unit rents compared to houses,” Ms Ezzy said.
Over the quarter, capital cities widened their lead against regional markets with rents in the former rising at more than twice the pace of the latter at 3% versus 1.2%.
Melbourne reported the largest quarterly rental increase, but it remained the country's most affordable capital, with a median rental value of $526 per week.
“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 had returned and they typically choose to rent in Melbourne or Sydney, the pendulum had swung the other way.”
Meanwhile, Sydney reclaimed the most expensive title from Canberra — over the quarter, rents in Sydney grew 3.4% to $699 per week, higher than Canberra’s $674 per week which reflected a 0.7% decline.
On an annual basis, Perth reported the highest growth at 12.8%, followed by Sydney, and Brisbane.
With rents in most areas rising over the quarter, gross rental yields expended further, with the national figure rising to $3.88%.
Ms Ezzy said that while gross yields have expanded over the year, net yields have declined as investors also felt the impacts of the rising rates.
“Weekly rents rose by approximately $48 per week between April 2022 and March 2023, however the average weekly investor mortgage repayment on the typical Australian dwelling increased by $184, leaving investors $136 per week worse off,” she said
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