Rents have hit record highs across Australia’s capital cities after the strongest growth streak in 14 years, intensifying pressure on housing affordability.
But there are early signs the unprecedented surge in escalating rents will ease as vacancy rates stabilise and investor activity kicks up.
Nationally, house rents rose 3 per cent over the June quarter but, significantly, unit rents are now growing at a faster quarterly pace, lifting by 3.4 per cent.
According to Domain’s latest rent report, it was the fifth consecutive quarterly jump for house rents and the fourth for units—the longest stretch of rental price growth on record.
The figures for the June quarter have revealed a key trend, indicating that affordability pressures of renting a house were shifting to units.
Domain chief of research and economics Nicola Powell said the record rent increases were not just a result of high purchasing prices locking people into the rental market longer or increased home loan costs being passed to tenants.
“The numbers that we’re seeing are [also] a result of a combination of … weaker investment activity throughout 2019-20, fewer building completions, greater household formation, investors cashing in on the recent price boom and rental demand being boosted by the return of international students and overseas migration,” she said.
Despite its second steepest quarterly rise on record, Melbourne remains the nation’s most affordable city to rent houses.
House rents in the southern capital rose 2.2 per cent over the June quarter to a new high of $460 a week, while unit rents surged 5.1 per cent to $410 a week.
In Sydney, it is forecast unit rents will hit a record high next quarter as they soar faster than houses, jumping by 5 per cent in the June quarter to $525 a week compared to a 3.3 per cent rise in house rents to a new high of $620 a week.
Brisbane house rents rose for the eighth straight quarter, up 4 per cent to $520 a week and unit rents leapt 4.7 per cent to $450 a week.
The city’s vacancy rate is still sitting at an all-time low of 0.6 per cent, below the national rate which still sits at 1 per cent.
Powell said there were initial signs the pace of quarterly rent growth would start to ease.
“While it is still a very competitive market, increased investment activity has helped to ease some pressure on tenants with national vacancy rates holding for the fourth month and the choice of rentals nudging higher over June,” she said.
“This, together with new first home buyer government incentives … has the potential to assist the transition of more tenants becoming homeowners, easing some of the demand pressures that the rental market is currently facing.”
