'Glimmers of hope': Rental price growth slows
The rental crisis has created incredibly challenging conditions for Aussie renters for most of the past three years, but in good news for renters, conditions have recently shown early signs of stabilising.
Vacancies have eased in every capital except Hobart and Darwin over the past quarter.
Rental markets remain tight, and rents are high, despite the lift in vacancy. But the latest data shows the annual pace of rental price growth has slowed in recent months in every capital city except Hobart and Adelaide.
In Sydney the annual pace of rental price growth for both houses and units has fallen to the slowest pace since late 2021, while in Brisbane house rents are growing at the slowest pace since mid-2021.
Rents nationwide have surged since 2021 and are reaching an affordability ceiling, and together with stabilisation in vacancy rates, the pace at which rental prices are growing has eased.
Over the past quarter, weekly rents for houses have remained flat or declined in every capital except Adelaide, Perth and Sydney. Unit rents have remained flat or declined in every capital bar Brisbane and Adelaide.
The stabilisation in conditions is a welcome sign that the worst of the rental crisis could be behind us.
And with rental pressures beginning to ease in some markets, rents have begun to fall across a substantial number of suburbs over the past quarter.
This is particularly the case in Sydney, Brisbane, and Canberra, with weekly rents remaining flat or declining over the past three months in more than half of suburbs analysed in each city.
In dollar terms, weekly rents have dropped by as much as $150 in some suburbs in Sydney’s north and east. House rents at Woollahra, Revesby, and Cremorne had the biggest drop across Sydney.
Vacancies have also eased in recent months in Sydney and are 0.36ppt higher than the level seen just three months ago, helping to alleviate upward pressure on rents.
Rents in close to 250 Brisbane suburbs have fallen or remained flat in the past three months, saving some tenants up to $100 a week in some inner-city areas.
In Canberra conditions are much more balanced, with vacancies sitting at 2% meaning less upward pressure on rental prices.
Return of investors eases rental crunch
A tapering in demand, coupled with a boost in rental supply has contributed to more stable conditions in the rental market and the slowing in rental price growth.
This has occurred despite population growth remaining strong and new housing supply failing to keep up.
Instead, an increase in investor activity has supported a rise in rental listings.
National new rental listings have increased 12.6% rear-on-year, while total rental listings have risen 8.7% in the year to July 2024.
There has been a 34% uplift in new rental listings in Perth over the past year, which is the largest annual increase of the capitals and followed by Adelaide and Sydney.
Strong growth in rents and increasing property prices have attracted investors to return to the market.
This year we’ve seen large uplift in new lending to investors which has led to more available rental properties.
Over the past year Perth has had the largest lift in vacancies (+0.35 ppt) coinciding with Western Australia also having the largest increase in new lending to investors.
领英推荐
Meanwhile rental demand is easing slightly with strained rental affordability forcing more people to move into share houses or back home with family. Overseas migration has peaked, and fewer international student arrivals are also easing demand pressures.
Victoria, however, is not attracting the same uplift in investor activity as other states and consequently Melbourne is not experiencing such an easing in rental price growth.
Rents were flat or declined over the past quarter in only 30% of suburbs analysed, and while vacancies in Melbourne have risen over the past year, it was only by a small 0.06 ppt.
Melbourne does remain one of the most affordable capital city rental markets – only Hobart is cheaper.
But with Victoria projected to experience the most significant population growth of any state over the next five years, there will be repercussions if investor activity doesn’t increase.
The Victorian government has rendered conditions relatively unfavourable for investors and as a result more investors are selling than buying. Already tight rental supply is being further constrained as many have been prompted to reassess their investments.
Given that new arrivals to Australia typically rent, the withdrawal of investors will have ramifications for the state's rental market.
Although rental market conditions have stabilised with the uplift in vacancy rates over the past four months, rental markets are still tight, and many will remain challenged by poor rental affordability and limited vacancies.
However, with weekly rents showing signs of stabilisation there are glimmers of hope for renters in the capital cities that the worst could be behind us.
Rental markets tighten in the regions
In regional areas the picture is a little different and vacancy rates have fallen over the past year in every regional area except regional SA, rental price growth has also reaccelerated in recent months.
The push toward regional living that accelerated through the pandemic is becoming an entrenched population trend. According to the latest Regional Movers Index (RMI), during the June 2024 quarter, 27% more people moved from cities to regions than in the opposite direction.
Metro to regional relocations now sit 16% above the pre-COVID average, with millennials – those currently aged 28 to 43 – leading those city outflows.
Sustained workplace flexibility and housing affordability issues are likely to be contributing to the ongoing re-location to the regions.
But delivering more housing in regional areas is challenging and rental markets are feeling the strain of heightened population flows, highlighting the need to cater for growing regional populations.
Want updates direct to your inbox?
PropTrack is Australia’s most reliable choice for property data, market insights and valuations solutions – utilising the latest artificial intelligence, machine learning techniques and software capabilities to power realestate.com.au and our customers. As part of our commitment to changing the way the world experiences property, PropTrack is helping organisations use transformative property data, develop new property experiences and automate valuations, enabling new solutions and services for the modern consumer. Join the millions of Australians who already use REA Group apps every month and transform your property experience. proptrack.com.au