Australia’s median rent ticked up to a record $601 a week last month, taking annual rent increases to 8.3% nationally.
The latest CoreLogic figures are based on what a median dwelling in Australia would rent for if it was put on the market at any given time.
Median rent in Australia has jumped from $437 a week in August 2020, accounting for an $8,000 annual increase in that time.
Rent value increases have averaged 9.1% for the past three calendar years.
It marks a stark contrast to the average annual growth rate of 2% during the 2010s.
What is driving higher rents?
CoreLogic said there have been several factors contributing to large rent rises since the pandemic.
The first is a notable decline in the size of the average household, partly driven by a reduction in sharehousing during the pandemic.
This meant more dwellings were needed to house the population even when population growth was close to zero.
Reserve Bank research found the average household size shrunk from 2.55 individuals per household to a historical low of 2.48 by August 2022, adding demand of 120,000 extra dwellings.
After the pandemic when international border restrictions were lifted in late-2020, the rapid increase in immigration arrivals fuelled demand in the rental market.
This was coupled with a temporary shock to investment housing activity between May 2022 and February 2023 as interest rates rose, according to CoreLogic.
Investor activity has since picked up but there is still a significant lag in establishing new rental properties.
Long-term issues also driving rental demand
CoreLogic said the reduction in social housing as a proportion of all Australian dwellings has also placed more pressure on the private rental market, as has a declining rate of home ownership.
Rent values have broadly outpaced wage and income increases nationally, meaning rental affordability has been declining.
The portion of gross median household income required to service median rent was 31% in September.
That’s up from 26.7% in March 2020.
Median rents across the capital cities ranged from $745 a week in Sydney to $535 a week in Hobart.
Canberra and Hobart were the only markets to see a decline in rent values during 2023, falling 1.9% and 3.5% respectively.
Below is a list of median rents across capital city markets:
Rental growth slowing
While annual growth in rents is higher than historic averages, it has broadly slowed.
In 2023, rent values rose 8.3%, down from a peak 9.6% in the year ended 2022.
The slowdown has been greatest across regional Australia where rents rose 4.3% last year, down from 13.4% in the year to August 2021.
The slowdown in capital city rent growth has been more recent, easing from a peak of 10.6% in the 12 months to April 2023 to 9.8% as at December 2023.
CoreLogic said the slowing rent growth could be attributed to renters being driven back to sharehouses or cheaper markets.
It also said the recent uptick in investor activity during 2023 might also be gradually easing supply-side constraints.
Image by Tierra Mallord for Unsplash.
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