Australia is experiencing the longest stretch of continuous rental price growth on record as house rents rise for the eighth consecutive quarter and unit rents for the seventh, the latest quarterly report by Domain shows.

The March report shows Australia’s rental market remains firmly locked in favour of landlords as surging immigration and low supply create challenging conditions for potential tenants in 2023.

House rents have jumped by $135 a week (or 31.4%) and unit rents by $140 (or 34.1%) since the pandemic low, the report shows. These rents are at a record high across all cities and unit rents are at a record high across all cities, apart from Canberra and Darwin.

“Across the combined capitals, we’re now seeing the longest stretch of continuous rental price growth on record as house rents rise for the eighth quarter in a row and unit rents rise for the seventh. For the first time since 2009, all capital cities have record house rents highlighting the rental crisis the country is currently going through,” said Dr Nicola Powell, Domain’s Chief of Research and Economics.

A shift fuelled by ongoing affordability concerns is turning budget-conscious tenants towards units. Units are seeing a solid acceleration in rental growth, particularly in Sydney and Melbourne, with Sydney unit rentals breaking into the $600 territory for the first time.

Immigration a major contributor

The report confirms the rent rises are driven by a multitude of factors. These include demand for rentals that have seen no signs of stopping, fueled by the influx of overseas migrants, international students, and temporary visa holders.

Australia’s net overseas migration gain hit almost 304,000 new people in the 12 months to September 2022, which continues to pressure living standards. The proportion of overseas migrant arrivals that were temporary visa holders is now sitting at 61% – a substantial driver of rental demand.

The impact of migration was highlighted recently after the announcement from China’s Ministry of Education to stop acknowledging degrees gained online in January. This saw the number of rental searches on Domain from China jump 124 per cent over the March quarter compared to last year. It highlights the competitive nature of Australia’s rental market, suggesting the pressure on the rental market could continue, particularly for cities that traditionally see a higher intake of residents from overseas.

Rental supply to lift, but more needed

Despite Australia remaining a landlords market with the number of vacant rentals at an all-time low for the month of March, tenants will find rental supply has begun to lift marginally. The vacancy rate across the combined capitals is marginally higher than last month’s record low (0.8%) and in regional Australia, it is the highest since December 2020 (0.9%).

Dr Nicola Powell said, “With many factors to consider, we need to see a massive change to strike the right balance between tenants and landlords. No single solution can fix this rental crisis as it’s a compounding issue of the high cost of housing, insufficient investor activity, and the lack of social and affordable housing.

“Rising investor activity is needed, the build-to-rent sector advanced, additional rental assistance provided for low-income households, more social housing and assisting tenants transition to homeowners,” she said.

Sydney

According to Domain, the stability in Sydney house rents was short-lived last quarter, with rents rising again over the March quarter to hit a record high. However, the annual outcome is the weakest in one year, suggesting that the second steepest upswing in house rents is easing. Gross rental yields for houses are at their highest point since December 2020, following the fastest annual surge on record.

Unit rents reached a record high after the steepest quarterly and annual increase ever recorded in the city’s history. After the seventh consecutive quarter of rental gains, it has provided the longest stretch of continuous rental growth on record. This has sharply boosted gross rental unit yields to the highest since 2014.

Melbourne

Domain said Melbourne house and unit rents rose for the sixth consecutive quarter to match the longest rental price growth period achieved in 2007-2008. House rental growth has accelerated to the fastest quarterly rise in six years and the steepest annual increase since 2008.

Despite house rents hitting a record high, Melbourne remains the most affordable city in which to rent a house, as rents have seen more substantial growth in other capital cities. The strong acceleration of asking rents has boosted house gross rental yields to a three-year high.

Unit rents are at a record high following the city’s steepest quarterly and annual growth. The pace of unit rental growth continues to accelerate and has outpaced the rise in house rents for the fifth successive quarter to narrow the price gap between property types to almost a three-year low. Sharply rising rents have boosted gross rental unit yields to an all-time high.

Brisbane

The stability in Brisbane house rents was short-lived, with rents rising again over the March quarter to hit a record high, the report showed. However, the annual outcome is the weakest since September 2021, suggesting that the steepest upswing in house rents is easing.

Gross rental yields for houses are at their highest point in 18 months, following the fastest quarterly and annual surge on record.

Units continue the record-long stretch of rising rents following the seventh consecutive quarter of growth to produce the fastest annual rise ever. Despite hitting another record high, the rate of quarterly change has slowed marginally. The continuous rise in unit asking rents means gross rental yields now sit at the highest point on record.

Adelaide

Adelaide houses continue a long stretch of rising rents following the eleventh consecutive quarter of growth to produce the fastest annual rise since 2005, according to the Domain report.

Adelaide remains the most competitive city for tenants in Australia, as quarterly growth accelerates to double the previous quarter. The improvement in asking rent has lifted gross rental yields annually for the first time since before the pandemic to reach the highest since September 2021.

The stability in Adelaide unit rents was short-lived last quarter, with rents rising again over the March quarter to hit a record high. Unit rents are rising faster than houses as affordability impacts tenants. Despite the turnaround, the annual outcome is the weakest since mid-2022, suggesting that the second steepest upswing in unit rents is easing.

Canberra

Domain says Canberra house rents held steady over the March quarter at a record high to remain Australia’s most expensive city in which to rent a house. The outlook remains more stable for tenants as rental growth stalls annually for the first time since September 2019. Tenants will find that rental choice has risen significantly over the past year to lift the vacancy rate and alleviate the pressurised rental conditions seen over the past few years.

Canberra was the only capital city where unit rents fell over the March quarter. This is the first quarterly fall since mid-2020, reversing the previous quarter’s growth and slowing annual growth to an almost three-year low. Canberra is no longer Australia’s most expensive city in which to rent a unit, as unit rents in Sydney soar to overtake Canberra.

Perth

The report says house rents have risen for the sixth consecutive quarter to reach a record high in Perth. Despite this, quarterly growth has slowed by a third compared to the previous quarter helping to ease annual gains.

Over the March quarter, unit rental growth doubled compared to the last quarter. This growth acceleration has pushed unit rents to a record high for the first time since 2013.
Perth is the second most competitive city for tenants in Australia. Although rental choice has lifted recently, it remains significantly lower annually, keeping the vacancy rate close to a historic low. Higher levels of investment activity are required to alleviate the current conditions. Perth not only offers investors the second highest-yielding capital city in Australia, but they are also at a record high for Perth.

Hobart

According to Domain, Hobart house rents bucked the national trend to become one of two capital cities to flatline over the March quarter to hold at last quarter’s record high. The steady outcome has slowed the annual growth rate to a two-year low.
Unit rents lifted to another record high, but the pace of quarterly growth has halved compared to the previous quarter and slowed annual rises. Tenants will find the increased rental choice is helping to ease rental conditions.

While Hobart remains a landlords’ market, the vacancy rate has risen to the highest point since mid-2020, suggesting that extreme rental conditions are beginning to improve for tenants.

article and photos by thepropertytribune.com.au