The latest data from Domain shows that rents across most capital cities in Australia are now at record high levels.
The Domain Rent Report notes that the combined capital city house rents are now up by 7.4 per cent annually which is the biggest jump since 2009.
Quarterly house rents hit record highs in all cities except Perth and Darwin, with all cities rising over the quarter apart from Darwin.
Over the past 12 months, Brisbane saw the biggest jump in housing rents, increasing by 12.9 per cent as the influx of people from Sydney and Melbourne continued. Canberra had the next largest jump in housing rents, increasing by 12.5 per cent.
Brisbane’s weekly asking rent for houses now sits at $480, up from $460 in the September quarter, to be more expensive than Melbourne at $445 per week.
Over the last quarter, all capital cities saw rents increase with the exception of Darwin, which saw a fall of 3.2 per cent. Canberra surged 4.7 per cent over the quarter.
Quarterly unit rent prices continue to increase in all cities, but over the past 12 months, demand for larger spaces has seen asking rents for houses outpace units, with the latter climbing 2. 5 per cent.
Domain Chief of Economics and Research Dr Nicola Powell said tenants are continuing to demand more space.
“House rents are racing past unit rent growth, as the increase in demand and competition for larger spaces has resulted in landlords hiking asking house rent prices three times faster than units over the past year,” Dr Powell said.
“In some cities, units with more bedrooms also continue to have rent price growth, this reflects the desirability for space from those able to work from home, but also provides an insight into demand demographics.”
Dr Powell notes that with the sharp increases in rents around the country, affordability is now becoming a problem.
“Rental affordability is a growing concern, particularly for lower-income households,” she said.
“The associated price constraint of a house will have driven a compromise from some tenants to a more affordable unit.
“Weaker investment activity did interrupt the flow of rental properties, however, investors are back with the share of home loan values for investment on the rise. This will boost supply and is likely to have helped to slow rental price growth over the December quarter.
“Competition to secure a rental will escalate once borders reopen and international students, new migrants, and expats action a relocation. This is likely to be further strained by demand from COVID-19 escapees as some return from sea and tree-change areas which may result in further increase in rental prices.”
Dr Powell said given the big push towards freestanding homes, units in cities like Perth are enticing opportunities for investors.
“Rising unit rents have kept gross yields higher across capital cities compared to house yields, providing better investment opportunities for potential investors seeking greater cash-flow,” she said.
“Rental supply remains short in many areas, providing little choice and strong grounds for further rental price hikes. Investors are returning to the rental property market to take advantage of these trends – this should help to slow down rent growth.
“Perth houses offer the highest gross rental yielding capital city for the first time on record for investors. As heightened demand for rentals in Perth outstrips supply due to returning expats and a steady inward flow of residents from other states and territories.”
Rental prices continue to increase in Sydney with the median rental price now at $600 per week for houses and $490 per week for units.
Rents have jumped 9.1 per cent over the course of the year for houses and 4.3 per cent for units.
Although rents are rising the pace of quarterly growth has eased for both houses and units.
The rent report highlights that unit rents are expected to rise further as renters opt for move affordable options.
Despite increasing to $445 per week, Melbourne remains Australia’s most affordable capital city to rent a house, recording the weakest annual growth of all the capital cities, at 1.1 per cent.
Rents have increased 3.5 per cent over the course of the quarter for houses and 1.4 per cent for units.
Melbourne’s rental market has edged into recovery mode on the back of extensive lockdowns.
That might lead to more opportunities to secure a rental property in the inner city, which has seen sharp falls in rents and demand.
House rents in Brisbane have jumped to a record high of $480 a week following a 4.3 per cent increase over the quarter. This is twice the pace of growth recorded in the prior quarter and is the largest increase in 15 years.
The surge in demand for houses has created a record rent price gap between houses and units.
Queensland continues to see strong interstate migration, with the report stating “people in the prime of their working years are the biggest interstate group moving to Brisbane, many have young families in tow, relocating for career opportunities, university education, affordability, and lifestyle”.
Vacancies remain close to a multi-year low, providing little choice and strong grounds for further rental price hikes making rental affordability is a growing concern.
In Adelaide, houses and unit rents increased $10 per week over the quarter to new record highs of $450 and $360 per week respectively.
Adelaide is a landlords’ market as a severe rental shortage keeps it firmly one of the most competitive capital city rental markets, behind only Hobart.
The combination of a steady flow of interstate movers, escalating purchase pressures that have kept many tenants renting for longer, and returning expats have helped to exacerbate rental demand.
Growth in house rents in Canberra increased over the quarter, jumping 4.7 per cent to $675 per week. This makes the current rental growth rate the strongest since 2007, with a 12.5 per cent annual increase.
Domain notes that “advertised vacant rentals have dropped by 22 per cent annually, as heightened demand vastly outstrips supply. Investment activity is on the rise as future equity growth is chased for houses and unit gross yields are attractive.”
Houses and unit rents across Perth have increased $10 per week over the quarter to $460 and $390 per week respectively. It is the highest asking rent in nearly seven years.
Advertised vacant rentals have plunged by 30 per cent annually, as heightened demand outstrips supply, supported by returning expats and a steady inward flow of residents from other states and territories.
House rents across Hobart jumped 1 per cent over the quarter to reach a record high of $500 per week, while unit rents surge 6.9 per cent over the quarter to a record high of $428 per week.
Hobart remains the tightest rental market of all the capital cities.
The report notes that “gross rental yields for houses are the weakest ever to be recorded for the city, illustrating that purchasing prices are increasing faster than rents”. This suggests new residents will opt to buy rather than lease.
In Darwin, house rents fell 3.2 per cent over the quarter to $600 a week, but remain 9.1 per cent higher than last year.
Darwin bucked the overall national trend to become the only capital city to record a fall in asking rent, suggesting that the pace of house rent growth may have peaked.