Rent prices in suburbs across the country have surged by over 30% in the past year due to low vacancy rates and strong rental demand. The national vacancy rates is currently stand at 1.42%, a slight improvement from the historic low of 1.31% in March. However, renters, especially those in capital cities, continue to face challenges due to limited availability.
While regional areas have seen a 0.35 percentage point increase in vacancy rates in the past year, capital cities have experienced a decline of 0.4 percentage points, exacerbating competition for available rentals. The growing demand for rentals in capital cities is attributed to the revival of central business districts (CBDs) as remote work and online studying transition back to hybrid models, and the return of migrants, who typically reside in inner-city areas.
On the supply side, many investors left the market at the start of the pandemic. Although there has been a rebound since mid-2020, the investor share of new lending remains lower than pre-pandemic levels. Additionally, the construction of new homes has plateaued, with approvals for new dwellings declining in the three largest states since mid-2021 due to construction industry delays and interest rate increases.
These factors have made it increasingly difficult for current and prospective renters to find suitable accommodations. The competitiveness of rental markets can be gauged by examining the suburbs with the highest annual growth in advertised rents for houses, with more than half of the top 10 suburbs located within 10 kilometres of their respective CBDs.
Rose Bay and Rosebery topped the list of suburbs with the largest annual growth in advertised rents for houses. Rose Bay experienced a substantial 38% increase in weekly rent over the past year, while renters in Rosebery faced significant increases of 29%. Similarly, in East Perth, the weekly rent reached $590, representing a notable 30% rise compared to the previous year. In New Farm, renters were paying approximately $850 per week, also reflecting a significant 30% increase. These figures emphasize the ongoing trend of rising rental prices in these particular areas.
Inner city suburbs experienced significant rent increases for units, with Melbourne, Aberfeldie, and Southbank seeing the highest annual growth in advertised rents of 38%, 33%, and 32% respectively. Haymarket and Zetland also experienced substantial increases in median rents, with renters now paying $930 and $850 per week respectively, representing a 31-33% increase compared to the previous year. These rent hikes reflect both the recovery of these areas from pandemic-related declines and the tight rental market, with rents now surpassing pre-pandemic levels. Renters continue to face challenges in finding affordable accommodations in these inner-city locations.
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