National vacancy rates have plummeted to a record low of 1.2 per cent, while rental values have soared 2.9 per cent in the three months to June.
Growth in the cost of renting a unit is now also outpacing the rise in house rents, as desperate tenants hunt for more affordable housing.
The data, released in the CoreLogic Quarterly Rental Review for the June quarter of 2022, also showed total dwelling rents were 9.1 per cent higher in the capital cities compared to June 2021.
In regional areas, dwelling rents have soared 10.8 per cent.
CoreLogic Research Analyst and report author Kaytlin Ezzy said the jump in rents had occurred without much overseas migration and the tight rental conditions were due to a combination of low supply and high demand from shrinking household sizes.
“This sustained period of strong rental growth has seen national dwellings record the highest annual growth in rental values since December 2008, when rental demand was supported by record levels of international migration,” Ms Ezzy said.
“However, the current surge in rental demand has occurred largely in the absence of overseas migration and has instead been driven by factors including low supply and a decrease in the average household size which has amplified domestic rental demand over the Covid period to date.”
Canberra is Australia’s most expensive capital city in which to rent a home with a median rent of $690 per week, followed by Sydney at $643 per week and Darwin at $565 per week.
Melbourne is now the most affordable capital with a median rent of $480 per week, while in Adelaide you’ll pay a median rent of $492.
In a trend seen since February, quarterly growth in unit rents outpaced the increase in house rents.
In the combined capitals units were up 3.5 per cent compared to houses (2.7 per cent) and in the combined regional areas unit rents jumped 3.2 per cent in the June quarter compared to houses (2.7 per cent).
With unit rents increasing at a faster pace than house rents, annual rental growth in units overtook growth in house rents over the 12 months to May (9.5 per cent and 9.2 per cent respectively) before recording double-digit annual growth of 10 per cent for the first time on record over the year to June.
Ms Ezzy said rental demand across the medium and higher density segment has surged throughout the first half of the year, partially driven by worsening affordability in the house sector.
“It’s likely the gap in rental values will narrow further as rental demand continues to shift towards relatively more affordable higher density properties,” she said.
The national vacancy rate has also fallen from 2.2 per cent in June 2021 to 1.2 per cent in June this year.
Adelaide has the tightest vacancy rate of all the capital cities at 0.3 per cent down from 0.8 per cent a year ago, followed by Brisbane, which has halved in the past year dropping from a vacancy rate of 1.6 per cent to 0.8 per cent.
Sydney has the highest vacancy rate among the capitals at 1.6 per cent, followed by Melbourne at 1.5 per cent, with the Victorian city coming off a much higher 3.5 per cent vacancy rate in June 2021.
CoreLogic Research Director Tim Lawless said as overseas migration picked up it’s likely rental demand will continue to increase; however, affordability constraints may eventually limit the rate of growth.
“With the exception of Darwin, the strong rental growth seen over the past year has led dwelling rents across all of the capitals to reach new record highs,” Mr Lawless said.
“Despite growing affordability concerns, rental markets are expected to remain tight for some time yet partly due to a shortage of supply following a long period of low investment activity between 2015 and 2021, but also due to renewed rental demand as international migration recovers.
“Worsening affordability could have a negative impact on rental demand as more people try to minimise costs by maximising occupancy rates or reforming larger households.
“However, this will likely be offset by additional rental demand as international migration returns to pre-COVID levels.”
Most expensive suburbs to rent
Sydney – Vaucluse – $2552pw – house
Melbourne – Brighton – $1321pw – house
Brisbane – Ascot – $1110pw – house
Adelaide – Glenelg South – $802pw – house
Perth – Dalkeith – $1205pw – house
Hobart – Sandy Bay – $698 – house
Darwin – Fannie Bay – $833 – house
Canberra – Denman Prospect – $1075 – house
Most affordable suburbs to rent
Sydney – Carramar – $340pw – unit
Melbourne – Melton South – $307pw – unit
Brisbane – Logan Central – $304pw – unit
Adelaide – Salisbury East – $316pw – unit
Perth – Orelia – $281pw – unit
Hobart – Claremont $325pw – unit
Darwin – Bakewell – $430pw – unit
Canberra – $504pw – unit