The past quarter has been tough for Australian tenants, with rents rising to new record highs as vacant rental properties remain scarce.
CoreLogic’s national rent index increased by 0.9% monthly and 2.9% quarterly in June. Dwelling rents are 9.1% higher across capital cities and 10.8% in regional areas compared to the same period last year.
CoreLogic research analyst Kaytlin Ezzy said the current surge in rental demand, which interestingly has occurred in the absence of overseas migration, has resulted in rental values increasing to their highest levels since December 2008.
“The current surge in rental demand 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,” Ms Ezzy said.
Vacancy rates across the country fell to a record low of 1.2%, exacerbated by the decline in all capital cities except Canberra. During the same time last year, the vacancy rate was at 2.2%.
Rental listings are also on a downward trend, with June figures down by 34% below the long-term average for the moth.
Rents are through the roof
Capital cities bucked the trend seen since the onset of the pandemic, reporting a surge in rents that outpaced regional growth rates.
In terms of property type, the quarterly gain in unit rents overtook the increase in house rents across both state capitals (up 3.5% and 2.7% respectively) and regional markets (up 3.2% and 2.6% respectively).
“Since March 2020 house rental values have increased at nearly twice the rate of unit rental values with the gap blowing out to 13.5% in December 2021,” Ms Ezzy said.
“It's likely the gap in rental values will narrow further as rental demand continues to shift towards relatively more affordable higher density properties.”
Melbourne now the most affordable rental market
Adelaide lost its status as the most affordable rental market after rents increased by 4.3%, its strongest quarterly growth since 2005.
Melbourne took over Adelaide as the most budget-friendly rental market. However, rents in the Victorian capital still increased over the quarter, up by 2.3%.
Of all capital cities, Darwin was the only one to report a rental gain of below 2% at 1.8%.
Canberra, on the other hand, remained as the most expensive rental market, with a typical dwelling renting out for $690 per week. Over the quarter, rents in Canberra rose by 2.2%.
These rental gains have fuelled the overall rental yield, which increased to its most robust quarterly reading since 2019.
Ms Ezzy said the rising rents and the slowing of property price growth has resulted in a 3.33% national dwelling rental yields in June.
“Despite the recent rise, gross yields are still slightly below the levels recorded this time last year and below the five-year average,” she said.
Rental markets likely to tighten further
CoreLogic research director Tim Lawless said rental demand would likely strengthen as overseas migration picks up — however, with affordability becoming a major concern, the growth could be limited.
“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,” he 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.”
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