Despite a marginal deceleration in Australia’s monthly rental growth rate in June, persistent demand coupled with a significant shortage of rental properties has ensured that rental growth remains notably above long-term averages, especially for units.
CoreLogic’s Quarterly Rental Review for Q2 2023 reports that the quarterly rental growth rate of 2.5% was consistent with the preceding quarter, but it showed a slight decrease from the 2.8% growth observed in the previous three months. This signifies the first instance of rental growth rate deceleration since November of the previous year. CoreLogic Economist remarked that although there are signs of a deceleration in national rental growth spanning monthly, quarterly, and annual trends, rental growth still outpaces the average rate.
Despite a surge in overseas migration and an undersupply of rental properties, the financial restrictions of some tenants might be reaching their thresholds. Moreover, a trend towards increased average household sizes and the creation of more shared housing arrangements could emerge as renters seek ways to distribute the escalating rental costs, which have soared significantly since the start of the COVID-19 pandemic.
CoreLogic’s latest report indicates that rental growth in Australia is primarily propelled by the more affordable unit sector. The quarterly growth rate for unit rents peaked at 4.4% before slightly receding to 3.6% in the June quarter. On the other hand, the growth rate for house rents was more modest, at 2.0% during the same period. The median rental cost difference between houses and units has substantially reduced to a mere $34.
The report also underscores a substantial deficiency in rental listings, with around 47,500 listings below the average of the past five years. Despite a mild easing, vacancy rates continue to stay notably below pre-COVID averages. Melbourne is leading in terms of quarterly rental growth, followed by Perth, Sydney, Adelaide, and Brisbane. Darwin demonstrated negligible growth, whereas Hobart and Canberra saw rental rates decline.
Adelaide has surpassed Melbourne to become the capital city with the most affordable rentals, with Hobart trailing closely. Conversely, Sydney maintains its position as the city with the most expensive rentals. The CoreLogic report offers a comprehensive analysis of Australia’s rental market, covering aspects like gross yields, comparisons between houses and units, city versus regional rentals, and information about the most and least affordable suburbs for both houses and units.
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