CoreLogic's rental review for the March quarter revealed an annual jump in rental rates of more than 10%, and vacancy rates remaining near record lows.
- Median rents increased by more than 10% from March '22 to '23.
- The average Australian renter is now paying an additional $52 a week in rent.
- A supply demand imbalance suggests already tough situation could continue to get worse.
The quarterly increase was 2.5%, up from 2% in the December quarter, for the national median rent to reach $570.
In its equivalent report, PropTrack also estimated median rents to have increased more than 2%, but had a more conservative median estimate of $500.
Vacancy rates for the March quarter were down to 1.1%, compared to 1.6% this time last year.
The average renter in Australia will now be paying an extra $52 a week in rent, or $2,727 per year.
SQM Research's weekly index released Tuesday yesterday paints a more grim picture, with rents up in all capital city unit and house markets, except for Darwin units that posted a decline over the year.
Asking rents for Sydney units led the charge, up 30.2% the past 12 months to $652 a week; Sydney house rentals were also most expensive among the capital cities at $961.
Booming demand...
CoreLogic Economist and report author Kaytlin Ezzy said that a surge in overseas migration was driving the excess demand for rental properties.
Australia's largest capital cities saw the most dramatic growth, with an annual 14.3% increase to unit prices showing a preference for accommodation in high density areas.
“The uptick in rental growth can be attributed to surging rents in the unit market, particularly across the largest capitals, with increased demand from overseas migration occurring amid a shortage of rental supply pushing rents higher,” she said.
CoreLogic Head of Research Eliza Owen has also pointed out the post pandemic trend of tenants moving away from shared accommodation, seeking more space and fewer housemates.
"The number of people per household fell from 2.6 to 2.5, which doesn't sound like that much of a difference, but the RBA estimates that it added to housing demand by about 120,000 dwellings," Ms Owen told the Savings Tip Jar podcast.
...and inadequate supply
Ms Ezzy also highlighted the deficiencies on the supply side of the rental market.
"There’s already a chronic undersupply of advertised rental stock in many parts of the country that’s translated into record low vacancy rates across most capitals. Such a low number of available rentals is a key factor that pushed rental values higher again last quarter,” Ms Ezzy said.
Over the four weeks to 2 April, the total number of rental listings throughout the whole of Australia was below 95,000.
This is 17.3% below the same period in 2022, and 36.3% less than the five year average.
However, government intervention thus far - such as Queensland's rent cap - has drawn the ire of property pundits who say they will only exacerbate the supply problem.
Ms Owen expressed concerns along these lines, but did say she didn't anticipate the catastrophic consequences others have warned of.
"Investor participation is much more aligned with capital growth than it is with rental returns or policies around rental security," Ms Owen said.
"[Capping rental increases] doesn't help, but I don't think it's something that's necessarily going to completely disincentivise investors."
Any sign of relief?
Some rental house hunters might be taking solace in yesterday's news that the RBA would not increase the cash rate for the eleventh month in a row.
Higher mortgage repayments tend to trickle through to higher rental rates, although CoreLogic pointed out despite record rental inflation, rates are still not keeping pace with mortgage increases, which could escalate the negative cash flow faced by some investors.
Some analysts highlighted the softer tone of RBA Governor Dr Phillip Lowe's accompanying remarks with the monetary policy decision, suggesting further rate rises were not inevitable.
Many economists though expect the cash rate to be raised once or twice more over the next couple of months, which would put additional pressure on tenants at end-of-lease time.
"Is there an end in-sight to the rental crisis?" was originally published on Savings.com.au and was republished with permission.