This article is from the Australian Property Journal archive
AFFORDABILITY constraints are pulling back on rental growth – which has hit its lowest level in four years – providing some minor respite for renters, many of whom have been opting for the more attainable unit market, reforming share houses and moving in with mum and dad to deal with surging rent and living costs.
CoreLogic’s latest data showed the Australian rental market has experienced its slowest growth in four years, lifting just 0.1% month-on-month in July – a stark contrast to the 39.7% surge recorded over the past five years that has lumped an additional $180 on weekly rental payments.
Results were varied across the country. Rents rose 0.6% in Adelaide and 0.3% in Melbourne and Perth, while remaining flat in Darwin and Canberra. In contrast, rents have declined in Sydney (down by 0.1%), Brisbane (by 0.1%), and Hobart (by 0.3%).
CoreLogic economist Kaitlyn Ezzy told Australian Property Journal there had been “quite a shift in demand” from renters.
“We’ve seen a shift away from the more expensive sort of house market towards the more affordable unit market, as well as the shift to some of the more affordable regional markets that are commutable, like Newcastle and the Illawarra,” she said.
The unit market is also a little less heated – with a national vacancy rate of 2.1%, compared to 1.1% for detached homes, according to PropTrack.
“We’ve also seen a bit of a change in the formation of households. There’s been a reforming of the share houses that broke up over COVID. Also, people are moving back in with mum and dad,” Ezzy told Australian Property Journal.
“Also, for those that can afford to, despite the high interest rate environment, there’s maybe a bit of an impetus to get into the housing market.”
Rents to ease further
CoreLogic expects the pace of rental growth to continue to ease, particularly as affordability issues stretch further. As well as surging rents, there has also been a cost-of-living crisis to deal with.
“Whether that results in national declines it’s hard to say. But it does appear evident that the demand that was driving those double-digit rental increases just isn’t there to support those rises anymore,” Ezzy said.
The tight rental market and high gross yields continue to encourage investors into the housing market at a higher rate than owner-occupiers, the latest official data showed, which could also slow down rents.
“Obviously, anything that will increase rental supply will have a cooling effect on rental value. So as we see more investors entering the market, that should help keep a lid on the pace of rental growth in the coming months,” Ezzy said.
Supply mission
National cabinet’s National Housing Accord officially started last month, aiming to deliver 1.2 million homes around the country over five years and turbocharge housing supply to combat low vacancy rates, high rents and affordability issues in the housing market.
However, a low base of approvals and new housing starts, and issues in the construction industry mean the target is unlikely to be reached. Australia would need an additional 83,000 tradies to combat labour shortages, according to the Housing Industry Association, while capacity constraints and high materials costs are also providing roadblocks.
