Rents hit another record high but growth likely to slow

Tenants continue to feel the pressure of the housing crisis, with rents surging to a record high and passing $600 per week.

According to CoreLogic, rents have risen 8.1 per cent nationally to $601 per week over the past 12 months and are up from $437 per week in August 2020.

Rents increased the most in Perth, up 13.4 per cent over the past 12 months, followed by Sydney at 10.2 per cent, Melbourne at 11.1 per cent, Brisbane at 8.2 per cent and Adelaide at 7.7 per cent.

Median rents across the capital city markets ranged from $745 per week in Sydney, to $535 per week in Hobart. 

Canberra and Hobart were the only markets to see a decline in rent values last year, falling 1.9 per cent and 3.5 per cent, respectively.

CoreLogic Head of Research Australia, Eliza Owen, said unprecedented levels of population growth was behind the big jump in rents across the country.

She said higher interest rates had also contributed by reducing investor activity and the overall supply of homes for rent.

“Recent growth in rent values, which averaged 9.1 per cent a year for the past three calendar years, stands in stark contrast to the average annual growth rate of 2 per cent in the 2010s,” Ms Owen said.

“The reduction in social housing supply as a portion of all dwellings over the decades has placed more pressure on the private rental market, as has a declining rate of home ownership. 

“Average household size has also been gradually declining over decades due to economic and demographic factors, requiring more dwellings to house a given population.”

Ms Owen said rent value increases had broadly outpaced wage and income rises at the national level, meaning rental affordability has also deteriorated. 

“The portion of gross median household income required to service median rent rose from 26.7 per cent of income in March 2020 to 31.0 per cent in September last year,” she said.

“While a far higher portion of median income is required to service a new mortgage, renters tend to be on lower incomes.”

Ms Owen said there were signs rental growth had started to slow down.

“While annual growth in rents is higher than historic averages, it has broadly slowed,” she said.

“In 2023, rent values rose 8.3 per cent, down from a peak of 9.6 per cent in the year to September 2022.

“The slowdown has been most evident across regional Australia, where rents rose 4.3 per cent last year, down from 13.4 per cent in the year to August 2021. 

“The slowdown in capital city rent growth began more recently, easing from a peak of 10.6 per cent in the 12 months to April 2023, to 9.8 per cent by the end of the year.”

She said the slowdown could be attributed to affordability constraints driving renters back to share housing, or to cheaper markets. 

“Additionally, the recent resurgence in investor activity through 2023 may be gradually helping to ease supply-side constraints,” she said.

Ms Owen said towards the end of 2023, there were signs house rental growth had started to pick back up.

She said after the big increase in unit rents, houses had started to look more affordable.

“Despite the concerning reacceleration toward the end of 2023, rent growth is still expected to slow this year,” Ms Owen said.

“The continued increase in investment lending, a normalisation in net overseas migration and the potential for a cash rate reduction could all contribute to a slowdown. 

“However, in the short term, the burden largely remains on tenants to secure cheaper housing, whether that be by re-forming share house arrangements, or once again looking to regional or outer suburban markets for rental accommodation.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.