PHOTO: Jasmine Gearie and partner Jack Wilson would like to buy instead of rent, but the pace of increases over the past two years has made that dream more difficult to reach. Photo: James Alcock
According to a recent report by Domain, Australia is facing a critical shortage of rental properties, with tenants enduring the longest period of continuous rental price growth on record. The report, known as Domain’s Rent Report, highlights several concerning trends in the rental market.
The report reveals that house rental prices have surged for a record-breaking 10 consecutive quarters, while unit rental prices have risen for nine consecutive quarters. The national median asking rent for a house has reached $600 per week, marking a 3.4 percent increase over the quarter and a significant 13.2 percent increase year-on-year.
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Even more striking is the steep increase in unit rents. Across Australia’s major cities, the cost of renting a unit has now equaled that of renting a house, standing at $600 per week, following a remarkable 23.7 percent increase in the past year alone. The most significant growth in unit rents has been observed in Sydney, Melbourne, and Brisbane, where prices have surged by up to 23.6 percent.
The skyrocketing rent prices in many parts of the country have created a challenging situation for tenants, as noted by Dr. Nicola Powell, Domain’s Chief of Research and Economics. She estimates that between 40,000 to 70,000 additional rental properties are needed to stabilize the rental market, bringing it into balance. This figure is equivalent to adding all the dwellings in the Local Government Area of Newcastle to the market.
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A balanced rental market typically maintains a vacancy rate between 2 and 3 percent, indicating a harmonious equilibrium between supply and demand. However, the current rental market in Australia falls far from this balance.
Tenants like Jasmine Gearie in Sydney are feeling the pressure, with her rent recently increasing from $630 to $700 per week, constituting an 11 percent increase in just a year. While home ownership is considered an alternative, various factors make it seem unattainable for many renters.
Jasmine Gearie and partner Jack Wilson would like to buy instead of rent, but the pace of increases over the past two years has made that dream more difficult to reach. Photo: James Alcock
The report highlights that Sydney, Melbourne, Brisbane, Adelaide, Perth, and Darwin have all reached or maintained record-high house rental prices. In contrast, all cities, except Canberra, Darwin, and Hobart, have experienced record-high unit rental prices.
Melbourne has lost its position as the most affordable city to rent a house to Hobart, where the weekly rent stands at $530, a title Hobart has not held since 2016. Additionally, Brisbane now shares the second most expensive city for renting a unit with Canberra, both averaging $550 per week, trailing behind Sydney. Canberra was the only city not to set records for either unit or house rental prices, which averaged $550 and $655, respectively.
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Perth leads the way with the strongest annual growth in house rental prices among capital cities, with a 20 percent year-on-year increase to $600 per week. For units, Sydney reigns supreme, with a 23.6 percent year-on-year increase to $680 per week.
Dr. Powell notes that a drop in rental prices seems unlikely given the current low vacancy rates. While rent increases may have moderated from the extreme levels seen in 2022 and early 2023, they remain considerably high compared to historical standards. Over the September quarter, rents increased by 3.4 percent. However, Dr. Powell suggests that the cash rate’s stability at 4.10 percent, combined with low vacancy rates, may attract investors back into the market.
Nevertheless, the high rental costs and the increasing cost of living make it challenging for tenants to transition to homeownership. Dr. Powell emphasizes the importance of providing incentives to assist tenants in becoming homeowners. The stability of the cash rate is seen as a positive development that can provide assurance to potential buyers.
SOURCE: DOMAIN