This article is from the Australian Property Journal archive
WHILE the pace of rental growth softened a touch in May, rents still rose by 11.7% over 12 months in the capital cities, as Australians’ finances continue to be crunched by household costs and the cost-of-living crisis.
May’s 0.8% rise across both capitals and the regions followed gains of 0.9% and 1% in April and March respectively, and took national rental growth to 9.9% year-on-year, according to CoreLogic’s Rental Insights.
It’s the first time in 10 months that rent growth has snuck in below double digits.
CoreLogic Economist Kaytlin Ezzy said the slowdown in the monthly growth rate was largely driven by a slowdown in regional markets, where rents increased 0.3% over May, down from a record growth rate of 1.2% in March last year.
“Regional rental growth has slowed dramatically from a year ago while capital city rents were up 1.0% in May. When you break that figure down further by property type, we can see the unit sector is under the greatest pressure, with rents increasing at a faster rate than houses due to their relative affordability.”
Capital city house rents increased 0.9% in May compared to a 1.4% lift for units. The gap between median house and unit rents has narrowed to $60 per week across the combined capitals and $36 per week nationally.
CoreLogic figures showed 44.4% of house and unit markets recorded a rental increase of 10% or more in the year to May. Of the 3,812 markets analysed, only 6.7% recorded a decline in rents for the period, the majority located in Canberra and regional areas.
Sydney had 38 markets where rents declined, with the majority located on the Central Coast. In Melbourne, just four saw annual rental decreases, while houses in the north-east suburb of Ascot was Brisbane’s only market to see a fall in rents.
Melbourne recorded the strongest month-on-month change in rents, rising 1.4% in May. Since the onset of COVID, capital city rents have risen 25.7% and regional rental values have increased 29.2%, adding the equivalent of $125 per week and $116 per week to the respective median rents.
In the past year rents have increased in every capital and rest-of-state region except for Canberra, where there’s been a 1.9% decline. Canberra was the country’s most expensive rental city until Sydney overtook it in December, with the national capital’s softening rental conditions likely due to there being more stock on the market. Its vacancy rate has increased from 0.7% in March last year to 2.2%, second behind Hobart at 2.7%.
Nationally, there were 4,409 additional new rental listings added to the market over the month, nudging total rental supply higher, but new listings remain 11.0% below the five-year average, and total rental listings remain 33.3% below the long-term average. The country is set to receive a record 400,000 new migrants in the current financial year and 315,000 in the next, putting further strain on supply and upwards pressure on rents.
National vacancy rates increased from a record low of 1.1% in April to 1.2% in May. All other capital cities recorded vacancy rates under 1.5%.
New supply is considered by many property participants as a required mechanism to ease the national rental crisis. Labor continues to struggle to wrangle support from the Greens, who hold the balance of power in the Senate, for its $10 billion Housing Australia Future Fund. The Greens on the weekend altered their demands; they now want a two-year rent freeze, the for the government to commit to tackle rental stress, and put $2.5 billion per year towards the purchase of existing properties for social housing.
Private capital, through the vehicles of shared equity schemes and rental investment trusts, presents the best opportunity to address Australia’s national housing crisis for both would-be home buyers and renters, according to analysis by LongView and PEXA, while they believe the “jury remains out” on the longer-term impact of build-to-rent developments on affordability.
