According to data from Proptrack, Australia is facing a severe shortage of rental properties, and the situation is predicted to worsen as rents soar nationwide. In the past year, rents in capital cities have surged by a significant 10.3%. Sydney retains its position as the most expensive city to rent a home in, with the median rent climbing by 2.8% over the last three months to reach a staggering $740 per week.
The rental market in Perth has experienced the strongest growth due to a scarcity of supply, with a notable increase of 18.2% in the past year, pushing median house prices to $660. Following Perth is Adelaide, which saw an 11.8% rise to $600, and Melbourne with a 10.6% increase reaching $580. Queensland stands out for the highest growth in advertised rents and boasts the most expensive regional market, with a median rent of $620 per week.
The demand for rental properties has led to a surge in apartment prices over the June quarter, closing the gap between the cost of renting a house versus a unit. Notably, unit rents have outpaced house rents both quarterly and year-on-year, with houses commanding only a slight $30 premium in capital cities.
Anne Flaherty, a senior economist at PropTrack, highlighted that the increased demand for rentals is concentrated in and around capital city areas, particularly near CBDs where there is a higher prevalence of units compared to houses. Overseas migration has been a significant driver of the rising demand, with migrants often opting to reside closer to CBDs, workplaces, or universities.
Every state in Australia is experiencing a shortage of completed new homes to meet the needs of a growing population. Flaherty warned that it could take years for Australia’s housing supply to align with the demand, as new dwelling approvals are currently at a ten-year low and there has been a considerable slowdown in new construction starts.
Despite the overall growth in rental prices, property investment expert Bushy Martin cautioned that the rental crisis is most severe in the affordable price segment, particularly for rents below $500 per week. While the median rent data may show growth, the reality beneath the surface is that properties priced at $500 or below are facing immense pressure, leading to significant shortages in this market segment.
Martin further explained that while rental price drops may eventually occur due to market dynamics, inflation, economic factors, and wage growth are currently hindering this process. The dissonance among these factors suggests that the rental market is undergoing a challenging period, with four-bedroom properties reportedly remaining vacant for extended periods, especially in the lower price brackets.
Priyam Gera