Rents have risen at the fastest rate for 14 years as Australia’s landlords seek to recoup costs in the face of rising interest rates and higher inflation.
According research firm CoreLogic’s quarterly rental review, the national rental index increased 0.9% in the month to June and 2.9% over the June quarter.
“This sustained period of strong rental growth has seen national dwellings record the highest annual growth in rental values since December 2008,” said CoreLogic research analyst, Kaytlin Ezzy.
Rents are 9.1% higher across capital cities and are up 10.8% in regional areas compared with June 2021. Canberra remains the country’s most expensive rental market, with the typical home renting for $690 per week, ahead of Sydney which recorded a median rental value of $643 per week, and Darwin at $565 per week.
The increase comes as the Reserve Bank raised interest rates for third time in as many months in an attempt to keep a lid on inflation which is predicted to rise to 7% this year.
Nicola Powell, chief of research and economics at Domain Australia, said that rising rates may impact rental affordability as landlords attempt to reimburse their increased costs.
“If an investor has higher levels of costs associated with their investment property, if they’re able to pass that cost on through higher rents they will do that,” she said.
However, Powell said it was only one of several other factors driving up rents, particularly vacancy rates as demand for rental properties rose.
Data from Domain showed widespread drops in vacancy rates since the start of year, with the national average plunging to 1%.
“Generally, when vacancy rates go below 2%, it’s a landlord’s market, at around 3% it’s balanced and above 3% it favours tenants. What we’ve got right now is a landlord’s market across every single capital city in Australia,” she said.
Greater “household formation” was one cause, Powell said, a phenomenon which saw people move out of home as rental costs in major cities like Melbourne dropped during the pandemic lockdown period.
She said that the lasting effects of this pattern, coupled with the return of international migrants and longer-lasting tenancies, as high prices lock people out of the property market, have compounded the effect.
“A house is a basic need for shelter, people deserve a roof over their heads. And it is challenging for lower income earners.”
Louis Christopher, managing director of property data firm SQM Research, said: “Rental vacancy rates continued to tighten across the country and there is nothing yet in the data that would suggest we are about to see a reprieve. The national rental crisis continues on unabated and as a result, asking rents are skyrocketing.”
Yet another factor was the drop in the number of homes being built as rising borrowing costs put a dampener on property development. Figures from the Australian Bureau of Statistics this week showed that the number of dwellings being built was down 1.5% in trend terms.
Julie Collins, the federal minister for housing, said that she found it “concerning” that so many Australians were struggling with rental prices and said it was an “unfortunate legacy of the former Liberal-National government”.
“The Albanese government has a strong set of policies that we took to the election to help address these challenges and we are already working hard to fulfil these commitments,” she said.
“These policies include the Housing Australia Future Fund which will build 30,000 social and affordable housing properties nationally in its first five years and we will introduce a National Housing Supply and Affordability Council to ensure the Commonwealth plays a leadership role in increasing housing supply and improving housing affordability.”