Rental supply at the lowest level in two decades

Rental stock across Australia has reached the lowest level since 2003 led by the reopening of international borders, putting more pressure on renters than ever before.

The PropTrack Rental Report September 2022 shows that the total number of rental properties listed on declined 20.5 per cent in the past 12 months, taking it to a near two-decade low.

While rents grew at the fastest quarterly pace on record in the September quarter, up 4.3 per cent.

The number of new listings also fell 10.4 per cent over the month to be 7.1 per cent lower year-on-year, leading to demand per rental listing increasing 18.8 per cent in the past 12 months.

PropTrack Director of Economic Research and report author, Cameron Kusher, said the rental market continues to retract as the Federal Government ramps up immigration.

“Australia’s rental market remains extremely tight, with vacancy rates and supply reducing further over the September 2022 quarter,” Mr Kusher said.

“As a result, rental prices nationally continued to climb.”

The national rental vacancy rate also hit a new record low in September at 1.6 per cent, which led to properties being leased faster than ever before at just 19 days.

Mr Kushner said as people move back to the major capital cities, pressure on rentals will continue.

“With fewer investors purchasing homes to rent out, the limited supply of stock, coupled with strong demand, is leading to heightened increases in advertised rental prices,” he said.

“The growth and tightness in the rental market appears to be shifting from regional areas back to the capital cities. 

“This is being driven by the return of many people who migrated regionally during the pandemic back to capital cities and the lift in overseas migration.”

According to Mr Kushner, pressure from immigration is especially prevalent in Sydney and Melbourne.

“Most overseas migrants to Australia settle in these cities with few purchasing a property before arrival, which is likely to keep demand for rentals heightened as supply of rentals is expected to continue to recede, pushing prices higher,” he said.

Mr Kushner said there doens’t appear to be a quick fix to the current situation.

“The solution to the current tight rental market is either more rental supply or less rental demand, or a combination of both,” he said.

“While there is some supply coming via build-to-rent, any supply additions are expected to be well and truly outweighed by the increase in demand from the re-opening of international borders and the ongoing decline in purchasing by first home buyers.

“These demand and supply issues can be addressed but none of these factors appear set to change in the near-term, which means a further tightening of rental supply and increases in rental costs seems likely over the coming year.”

According to Mr Kusher, the tight conditions driving rental price growth are set to continue in capital cities, though some of the heat has begun to come out of the regional market. 

Across the combined capital cities, rents increased by 3.2 per cent over the quarter, while rents were unchanged in regional areas.

Sydney (-24.2 per cent), Melbourne (-32.8 per cent) and Brisbane (-22.7 per cent) saw the biggest year-on-year declines in total listings, with Melbourne (45.8 per cent), Sydney (26.8 per cent) and Brisbane (25.9 per cent) also experiencing the strongest increases in demand per listing year-on-year.

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.