The housing boom has been placing pressure on the Australian rental market for months, but new data from CoreLogic suggests the surge in rent has reached a new peak.
Tenants are now facing the fastest rising rent prices since 2008, CoreLogic’s data shows.
National rental prices have climbed 8.9% year-on-year according to the property researcher’s latest Rental Review, despite evidence of a slight slowdown in the rate of increases in recent months.
The surge in rental prices has several causes, most notably the rising tide of property prices, along with increased demand in regional Australia.
Tim Lawless, research director at CoreLogic, said a shortage of stock caused by historically low levels of investor activity had led to the same trends seen in property sales in the rental market.
The fastest rental gains were recorded in Brisbane and Sydney, up 2.6% and 2.3% respectively.
The report showed tenants nationally spent on average 28.7% of their household income on rental payments through March, slightly above the decade average of 28.1%.
Lawless said other trends related to the pandemic, including demand for lower density housing by those looking for more space while working from home, had led house rents to rise at more than double the pace of apartments over the past year, although the gap was narrowing.
He said CoreLogic expected rents nationally to continue to rise for the foreseeable future, with that outcome placing affordability pressures on tenants.
Meanwhile, increases in regional rents are up by 12.5%, the highest annual figure on record and the fastest rate of increase since 2005.
Capital cities lost 11,800 people to internal migration, the largest quarterly net loss on record, in the first three months of 2021, according to the ABS.
In regional Australia, vacancy rates have plummeted in some regions to 1% as the move of city residents to regions has pushed property and rental prices up, and led to a significant reduction in available properties and rental affordability since the start of the pandemic.
Lawless said demographic data is showing a clear trend toward regional population growth, “driven by a combination of more people leaving cities for the regions, but also fewer people moving from the regional areas to the capitals”.
He said the rise in regional housing at a time when household incomes have remained flat meant it was “likely that rental affordability is becoming a lot more challenging in some of the most popular regional markets”.
Across the board, the report found that, relative to household incomes, Melbourne remained the most affordable capital city to rent, with households dedicating 26% of their gross annual household income to rent a dwelling compared with the national average of 28.7%.
Lawless said this was in part due to the loss of international students and overseas migration by the city, a factor that could push demand up as Australia’s international borders reopened.
“Once international borders open we could see a more substantial boost to rental demand than other cities. If this is the case, we could see Melbourne once again recording a faster rate of rental growth,” he said.