Tenants may be relieved to hear Australia’s monthly rate of rental growth eased in June, but ongoing demand pressures and chronic undersupply have kept rental growth, particularly for units, well above long-term averages.
- National rent values rose 2.5% in the June quarter
- Rate of national unit rental growth outpaces houses, median rent gap now just $34/week
- Melbourne lost its most affordable rental crown to Adelaide
CoreLogic’s Quarterly Rental Review for Q2 2023 shows the country’s quarterly rental growth trend of 2.5% was in line with the March quarter increase. The quarterly results are down 30 basis points from the 2.8% increase seen over the three months to May. This is the first slowdown in quarterly rent growth since November last year.
CoreLogic Economist and report author Kaytlin Ezzy said while a slowdown in the pace of national rental growth is now evident across the monthly, quarterly, and annual trends, rental growth remains well above average.
The slowdown in national rental appreciation can also be seen in the annual trend, with national rents rising 9.7%, over the 2022-23 financial year, down from the record 10.2% lift seen over the 2022 calendar year.
“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.
“While rental demand from overseas migrants is likely to remain strong for some time yet, particularly across the largest capitals, we’ve already seen a reduction in domestic rental demand via an increase in the average household size.”
With national rents 27.4% higher since the onset of COVID, equivalent to a $127 per week increase on the median dwelling rent in Australia, Ms. Ezzy said 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.
The gap between house and unit rents is just $34/week
Rental growth continues to be the strongest across the more affordable unit market Ms. Ezzy said, with national unit rents recording a new peak quarterly growth rate over the three months to May (4.4%) before easing to 3.6% over the June quarter.
National houses recorded a milder rental increase of 2.0% over the quarter. While units remain the more affordable option, the continued preference for unit rentals has seen the gap between median house and unit rents shrink from $62 in December 2021 to just $34 in June.
The massive shortfall in rental listings
Rental listings remain well below the previous five-year average, with a national shortfall of approximately -32.4% or 47,500 rental listings recorded over the four weeks to June 3rd. Despite the continued shortage in listings, national vacancy rates eased slightly over the quarter, from 1.1% in March, to 1.2% in June, but remain well below the pre-COVID decade average (3.3%).
Melbourne records strongest quarterly increase
Across the individual capitals, Melbourne continues to lead the pace of quarterly rental growth, with dwelling rents rising 3.9% in the quarter, followed by Perth (3.4%), Sydney (3.2%), Adelaide (2.5%), and Brisbane (2.1%).
Rents across Darwin rose just 0.7% over the quarter, while both Hobart and Canberra saw rents decline by -1.0%.
Adelaide cheapest capital city for rentals
Adelaide has replaced Melbourne as the country’s most affordable rental capital, with the typical dwelling renting for $549 p/w compared to $551 p/w in Melbourne.
However, Adelaide could soon lose its new title to Hobart given a gap of just $3/week separates the cities’ rental markets. Hobart could soon become the country’s most affordable rental capital if Adelaide rents continue rising as Hobart rents fall.
Sydney maintained its position as the most expensive capital for the second quarter in a row, with a median weekly rental value of $733.
CoreLogic’s Quarterly Rental Review for Q2 2023 includes a comprehensive analysis of Australia’s rental market including data on:
- Gross yields
- Houses vs Units
- City vs Regional
- Most affordable/expensive median rent house suburbs
- Most affordable/expensive median rent unit suburbs
- Australia’s top 30 most affordable/expensive rental suburbs