Rents will continue to climb in capital cities and some regional areas, according to new research.
According to InvestorKit, surging immigration, tight supply and rising interest rates will continue to put upward pressure on rents.
The research found Sydney, Melbourne, Brisbane, Adelaide and Perth have experienced rent surges, along with several regional hubs.
InvestorKit Founder and Head of Research, Arjun Paliwal predicted slower, but still strong, growth for rental markets in the coming months.
“Australia’s capital cities are experiencing a strong bounce back, with strengthening migration, the return of international students, and Australians flocking back to CBDs,” Mr Paliwal said.
“We have seen this especially in the Melbourne and Sydney markets.
“Internal migration is also an emerging trend this year, with Queensland, Western Australia, and South Australia proving popular due to employment opportunities and strong lifestyle factors, but greater market affordability.
“In lifestyle regional markets we are seeing rental price points start to reach affordability peaks, which is a common theme being tested, resulting in a slow down of the pace of rental growth across the nation in comparison to last year.”
Mr Paliwal said Sydney and Melbourne are expected to see further rental growth in the next 12 months, with prices also likely to rise.
He said due to low vacancy rates, Sydney’s rents have increased by 9.2 per cent over the past year, while Melbourne has been growing at 8.9 per cent.
“Rising migration and tight supply and demand will see these markets as top performers in the near to medium term,” he said.
He said that Adelaide was also likely to see further rental growth with rents having surged by almost 50 per cent over the last decade, including more than 11 per cent in the past 12 months.
“This long-term growth is higher than the average of the eight greater capital cities,” Mr Paliwal said.
“Adelaide’s internal migration is quickly turning from negative to positive, its net overseas migration trend has reached the highest point in over a decade, and risk of oversupply in the market is limited.”
Mr Paliwal said low vacancy rates pushed Brisbane rents up by 14.6 per cent over the past year.
“As supply sits at an extremely low level, the high market pressure will likely push rents further up,” he said.
While in Perth, the vacancy rate has been largely dropping for the past five years and it now sits at the lowest level in over a decade, which has pushed rents up by 16.1 per cent over the past year.
Across the regional markets, Upper Hunter in NSW has seen its vacancy rate at extremely low levels since 2021, which pushed rents up 12.5 per cent in the past year.
“The recovering local job market has seen more and more people choosing to call this region home, while new housing supply remains low,” Mr Paliwal said.
“This market is set for strong rental returns in the next 12-24 months.”
The vacancy rate in Townsville has also dropped to a crisis levels, and has stayed well below 1 per cent since 2020, seeing rents rise by almost 10 per cent in the previous 12 months.
“As the supply level is staying low, the high market pressure will likely push rents further up,” he said.
“Townsville is becoming one of the fastest growing internal migration magnets of the country, which will see rental demand continue to surge.”
Meanwhile, Bunbury in WA also has extremely low vacancy rates which have pushed rents up by almost 17 per cent over the past year.
“As supply level is not increasing dramatically, the high market pressure will likely push rents further up,” Mr Paliwal said.
“The increasingly active job market, lifestyle and affordability of Bunbury has seen strong internal migration, which is set to continue.
“Established supply is tight and demand is rising, while new build approvals are low. Bunbury will be a strong regional rental market.”
Other markets that are also incredibly tight at the moment and likely to see further rental growth include, Tamworth, Wollongong, Newcastle, Shepparton, MacKay, Burnett, Granite Belt, Toowoomba, Rockhampton, Barossa, Murray and Mallee and Limestone Coast.
Mr Paliwal said while regional and metro rental growth was set to continue in many areas for the coming 12-24 months, he predicted easing interest rates could release some market pressure.
“Easing rates could see landlords less stressed about mortgage repayment, passing those savings on to renters,” he said.
“Furthermore, both owner-occupiers and investors would be encouraged to come back to the sales market, leading to lower rental demand.
Mr Paliwal said affordability levels would be tested as well.
“However, the rental crisis will not be over unless the underlying issues are resolved – a greater spread of housing demand across the country and substantially improved housing supply for the long term,” he said.
“Investment opportunity remains strong, but a research-led approach is a must as not every market will be a performer.”