The supply shortage of rental properties is anticipated to worsen as rental prices soar across Australia, particularly in capital cities. According to data from Proptrack, Sydney remains the most expensive city to rent a home, with median rents climbing by 2.8% in the last three months to reach $740 per week. Perth experienced the strongest rental growth due to limited supply, surging by 18.2% over the past year, with median house rents hitting $660. Additionally, Adelaide saw an 11.8% increase to $600, while Melbourne witnessed a 10.6% rise to $580 in median rents.
Queensland observed significant growth in advertised rents, boasting the highest rates in the regional market at a median of $620 per week. The demand for rental properties, especially apartments, surged in the June quarter, reducing the gap between house and unit rentals. Unit rents surpassed house rents both quarterly and yearly, with houses holding a mere $30 premium in capital cities.
Senior economist at PropTrack, Anne Flaherty, pointed out that the heightened demand for rentals was concentrated around capital city regions, particularly close to CBDs where units outnumber houses. The upsurge in rental demand in inner-city areas was primarily fueled by overseas migration, with migrants opting to reside nearer to CBDs, workplaces, or universities. Ms. Flaherty highlighted that every state in Australia faced a shortfall of newly completed homes to cater to the expanding population. She warned that it might take several years for Australia’s housing supply to align with demand, given the current low levels of new dwelling approvals and construction commencements.
Real Estate Institute of Australia’s vice president, Hannah Gill, expressed concerns about the lack of affordable housing stock in the market, predicting a deficit of approximately 37,000 dwellings for the fiscal year. She emphasized that the existing shortfall could potentially widen over the following six years due to historical lows in new dwelling commencements. According to property investment expert Bushy Martin, the crisis in the rental market primarily affects affordable price brackets, notably rentals priced at $500 or below. While rental prices continue to rise, Mr. Martin noted a softening trend in the rental market across various states, particularly in the sub-$500 segment where severe shortages are prevalent. Property managers have reported extended vacancies for four-bedroom properties in this price range.
Mr. Martin anticipated that market forces would eventually lead to a drop in rental prices, particularly for properties below $500 per week, where the most significant rental crisis exists. Despite ongoing challenges, he suggested that rental prices would likely normalize once inflation, economic factors, wage growth, and property cycles realign.
Priyam Gera