Rental Growth Slows Down Across Australia, but Market Outlook Remains Uncertain

A new development is advertised for lease in Melbourne, Australia, on Sept. 4, 2018. (William West/AFP via Getty Images)

Australia’s housing rental growth is slowing down from record highs in 2022, reducing the pressure on struggling renters. However, housing experts warn that the future outlook of the rental market is uncertain.

According to the real estate data provider CoreLogic, the Australian rental market entered the highest upswing period in the company’s 18-year record during the COVID-19 pandemic, with prices surging by 22.2 percent since September 2022.

Specifically, the national median weekly rent jumped from $430 (US $297) per week to $519 during the 27 months.

While renters witnessed price growth reach a record high of 10.2 percent in 2022, the pace of increase has fallen in the last several quarters.

New data showed that rental growth stood at two percent in the December 2022 quarter, down from 2.3 percent in the September quarter and three percent in the three months to May.

Among the capital cities, Perth reported the highest growth at 3.2 percent, followed by Sydney at 2.8 percent, and Brisbane at 2.2 percent.

Darwin and Hobart only saw a marginal growth of 0.3 percent and 0.2 percent, respectively, while prices dipped by 0.7 percent in Canberra.

Although Canberra continued to be Australia’s most expensive rental market, with a weekly median rent of $681, Sydney was quickly catching up as the price difference between the two cities narrowed to just $2.

“The decline in quarterly rental growth rates observed in the December quarter was led by the capital cities where rents continued to increase but at a slightly slower rate than they have done in September and June quarters,” CoreLogic head of research Eliza Owen said.

Growth Drop Coincides with Rise in Supply

The slowdown in rental growth occurred as the market saw a slight increase in the number of rental properties.

In December, the rental vacancy rate climbed to 1.17 percent from a low of 1.05 percent in November.

Furthermore, newly advertised rent listings reached a seasonal peak of 50,867 in the month of December, the highest volume observed by CoreLogic since mid-February 2022.

A lease sign is displayed outside a home in Edmondson Park in Sydney, Australia, on April 28, 2016. (Brendon Thorne/Getty Images)

While the supply increase is positive news for renters, Owen was unsure whether the trend would continue.

“It is not entirely clear whether the rental market will continue inching toward a turning point or if this is a temporary, seasonal reprieve due to higher new listings through December,” she said.

“It’s important to recognise despite the increase in rental listings; the figures remain 13.8 percent lower than the previous five-year average for this time of year.”

Future Outlook Stays Uncertain

The outlook for the rental market in 2023 remained mixed as Owen pointed to the resumption of migration, which will maintain upward pressure on rents, especially in Sydney and Melbourne, the two top destinations for migrants.

At the same time, there is an issue with supply as investors face higher interest rates and reduced amounts of borrowed capital, limiting their ability to make more investments in the market.

However, Owen said the market would likely see a seasonal lift in new rental listings in early 2023, providing renters with more choices and reducing the pressure on prices.

Meanwhile, Cameron Kusher, executive manager of economic research at real estate data provider PropTrack, warned that struggling tenants might not see much improvement in market conditions despite the moderate rental growth in the coming months.

“We expect rental prices will continue to grow in the capital cities in the months ahead, although the prospects for further rent increases regionally do appear to be easing,” he said.