Olympian rent hikes at lowest level since before Tokyo Games
The rental market has been breaking records while renters have been left on the sidelines but the market may be nearing its peak.
In the housing Olympics, the rental market has been the performer most likely to be tested for steroid use.
The record breaking 39.7 per cent surge in rents recorded over the past five years appears, however, to have neared its personal best.
The national rental vacancy rate held relatively steady in July, dropping just 0.01 percentage points (ppt) to 1.42 per cent, according to PropTrack data released Tuesday (13 August).
In further crowd-pleasing news for renters, the rental market experienced its slowest growth in four years, with CoreLogic reporting a modest 0.1 per cent increase in national rents during July.
While renters are still struggling with vacancy rates nowhere near the 3 per cent mark deemed to be a balanced market, there are signs the worst may soon be over.
The slight drop in vacancy was driven by regional markets, which recorded a 0.04ppt decline month on-month to 1.28 per cent. Capital cities, in contrast, held steady at 1.47 per cent over July, according to PropTrack’s newly released data.
“While conditions remain incredibly tough for Australia’s renters, rental supply has improved over the past three months,” PropTrack’s Senior Economist Anne Flaherty said.
Capital cities have seen the largest improvement, with vacancy up in six of the eight cities over the quarter.
“Supporting the rise in capital city vacancies has been an increase in investor activity, with the number of new loan commitments to investors up 25 per cent over the June quarter of 2024 compared to the same period last year,” Ms Flaherty said.
“Higher investor activity has resulted in more rental properties hitting the market, helping to counteract the increase in demand from population growth.
“Regional areas, in contrast, have seen conditions deteriorate further, with vacancy falling to 1.28 per cent in July.
“Vacancy in the regions has now held below capital city levels for three consecutive months.”
The pain threshold of renters is still being seriously tested in some parts of the country.
Perth recorded the strongest rental growth, with annual rents increasing by 12.7 per cent followed by regional Western Australia at 10.6 per cent.
Rents in July rose 0.6 per cent in Adelaide and 0.3 per cent in Melbourne and Perth.
In contrast, rents have declined in Sydney (-0.1 per cent), Brisbane (-0.1 per cent), and Hobart (-0.3 per cent), while remaining flat in Darwin and Canberra, according to CoreLogic.
CoreLogic Australia economist Kaitlyn Ezzy said the slowdown in rental increases was a positive sign for renters, who have faced a significant increase in median weekly rental payments—up by approximately $180 over the past five years.
“The varied rental growth across capitals highlights an affordability ceiling in major cities,” Ms Ezzy said.
“With tenants unable to borrow more to cover rent, many are turning to alternatives such as shared housing, relocation to more affordable areas, or leaving the rental market altogether and buying their own homes,” she said.
Rental crisis still entrenched
The glacial pace of improvement in the rental market is not enough to ease the pain felt by those reliant on rental properties for a roof over their head.
In New South Wales, vacancy rate shifts across the state varied.
The REINSW Vacancy Rate Survey results for July 2024, released Tuesday (12 August) show that residential rental vacancies across New South Wales remain at crisis levels.
The residential rental vacancy rate for Sydney overall rose by 0.1 per cent to be 1.8 per cent, however, this is still a historic low.
REINSW’s CEO, Tim McKibbin, said vacancies in each of the inner, middle and outer rings of Sydney increased over the last month to be 2.4 per cent (+0.2 per cent), 1.7 per cent (+0.1 per cent) and 1.5 per cent (+0.2 per cent) respectively.
“While this is the highest overall vacancy rate we’ve seen for Sydney over the past 12 months, let’s make no mistake that the rental market is still in crisis.
“Slight fluctuations are to be expected from month to month and, despite these increases, there’s no doubt that the rental crisis continues to maintain its grip,” he said.
“Demand for rental accommodation certainly isn’t slowing and, while this month’s survey does show some easing in rates, it’s no cause for celebration.
“The residential rental market may be fluctuating, but three things remain certain; the availability of stock is at an all-time low; weekly rents are rising; and, tenants are faced with ever-increasing living costs.
“There’s no doubt that the challenges facing those involved in the residential rental market in New South Wales remain significant.”
Largest rent rises in largest properties
Larger rental properties are showing more resilient rent growth, despite being more expensive.
As renters congregate in larger share houses in an attempt to ease their rent and cost of living bills, they are inadvertently driving up the cost of renting those larger homes.
CoreLogic’s newly launched bedroom count metric - which analyses housing market performance segmented by the number of bedrooms - reveals a slowdown in rental growth for dwellings with fewer bedrooms.
For houses, rents increased 8.4 per cent nationally in the year to June, and this ranged from a 7.6 per cent rise in houses with up to two bedrooms, to 8.7 per cent in larger houses with five bedrooms or more.
Eliza Owen, Head of Research, CoreLogic, said despite larger houses seeing higher rent growth on a national scale, this is a trend largely led by NSW and Queensland, with Melbourne also showing distinctly higher growth in house rents with five or more bedrooms.
“In most capital cities, two-bedroom units have sustained the highest increases in rent over the year.
“Looking ahead, cities where larger house rents are underperforming, such as Perth and Adelaide, may eventually see a similar shift to higher demand for larger dwellings that can be occupied by shared households.”
