Australia’s capitals are experiencing the strongest annual rental increase on record due to a surge in overseas migrants and students and a shortfall in rental listings.
In April, CoreLogic’s national dwelling rental index increased by 0.8%, up 2.8% for the past three months, and 10.1% higher for the year so far. Combined capitals annual rental growth of 11.7% was a record and largely attributed to higher demand for units in capital cities.
With the exception of Darwin (-0.3%) and Canberra (-0.2%), each capital city increased its dwelling values in April. Topping the list for rental increase is Melbourne at 1.4%, followed by Sydney and Perth both at 1.3%, and Adelaide at 0.8%. Across the rest-of-state markets, the highest monthly rental increase was observed at Regional SA (1.1%), followed by regional Queensland and WA at 0.6%.
According to the report, capital city rents continue to increase due to the ‘mismatch’ between supply and demand. The total supply of capital city rental listings dropped to -20.9%, which was lower than the level recorded last year, and is -39.8% below the five-year average.
There is a clear easing of momentum across regional rental markets, as internal migration rates normalize and vacancy rates begin to move from recent record lows.
In the past three months, regional rents have risen 1.3%, and over the past year, they have risen 6.0%, down from a cyclical peak of 12.5% in November 2021. Melbourne ($535 p/w) lost its position to Adelaide (($534 p/w) as the country’s most affordable rental capital, whereas Sydney ($711 p/w) is still the country’s most expensive capital to rent.
Rent growth in capital cities continued to outpace that of house rents in April, rising 1.6% and 0.9%, respectively. The strong demand from migrants and foreign students reveal that unit rentals are still the most attractive to them, especially to those who first settle in medium to high density housing at a more affordable accommodation.
Increases in unit rents across the capitals remain strongest in Sydney and Melbourne, which recorded new peak rates of growth in both quarterly and annual trends.
Sydney’s unit rents increased 5.8% for the rolling quarter and 19.1% for the year to April. Melbourne’s unit rents rose 5.0% for the three months and 15.2% over the year.
The flow of migrants and low rental supply will likely continue to make renting difficult in the short to medium term, so renters won’t see much relief. Since new unit approvals have been below average since 2018, the rental market will likely continue to experience supply issues in the medium to long term.
Property rentals are expected to make significant changes in the next quarters. So whether you’re a property owner planning to join the rental listings, or a rentee looking for the best option especially for residence or business, it’s always advised that you consult experts who are more familiar with the capital cities and regional areas.
