Migration, Investor Hesitation Push Rents to Record Highs

Sydney has regained its position as the most expensive city in Australia to rent in for the first time since 2018.

Domain’s quarterly rental report for June showed that all Australian cities had rents rise significantly.

The rental market has been hit hard—as international students and migration continue to have an impact on demand, undersupply remains an issue. 

This is being exacerbated by the trend of households having fewer people despite a move to multi-generational family living, and tenants leasing for longer as they remain locked out of home ownership. 

Investors are getting cautious about putting their money into rental properties as the cost of holding debt increases.

Meanwhile, the cost of building and labour supply issues is delaying new stock to address the housing undersupply..

In Sydney, house rents rose four times as fast in the June quarter as in the previous quarter—the second-fastest rise in the city’s history, with a weekly high rent of $700. 

Apartment rents in the city have grown for the eighth consecutive quarter with yields now at a nine-year high.

The NSW capital is now the most expensive city to rent in for the first time since 2018 with the highest annual lift in gross rental yields since March 2020. 

Rents for houses in each capital city

^{_{Source: Domain Rental Report, June 2023}}

Melbourne remains the most affordable city to rent a house in despite the fact that house and apartment rents rose for the seventh consecutive quarter, making it the longest stretch of increasing rents for the city on record.

House rental yields have hit a four-year high while apartment yields have set a record.

The gap between houses and apartments in terms of rents is now at its lowest in three years.

Brisbane’s annual growth of house rents has reached its slowest pace since September 2021 but it still double the pace of the previous quarter for rental growth over the June quarter. 

Apartments, however, recorded their eighth consecutive quarter of growth with the fastest annual rent rise in Brisbane’s history as a city. 

It is the steepest rise since 2008 with yields the highest they have been.

Rents for units in each capital city

^{Source: Domain Rental Report, June 2023}

Adelaide house rents have increased for the 12th consecutive quarter while annually its apartment rents are growing faster than its house rents, creating affordability issues and concerns.

In Canberra, house rents declined over the quarter and quite steeply, marking the first annual decline for the city since 2014, costing it the title of the most expensive rental market in the nation.

Only Hobart also bucked the national trend with a drop in house rents.

The national capital’s apartment rents steadied with most tenants better off in Canberra than in most other cities. 

The vacancy rate in Canberra is also Australia’s highest with the available rental supply more than doubling every year, moving the city to a more balanced market.

On the west coast the story is much the same as in other cities: Perth house rents increased to a record asking rent with annual growth at a two-year high with unit rents also rising over the last quarter with Perth and Adelaide being the two most competitive city for tenants in the country. 

Hobart and Darwin apartment rents decluned with Hobart’s vacancy rate the highest it has been and the second highest in the country. 

The drop in house rents is the steepest quarterly decline since mid-2020 with the annual growth in house rents falling for the first time since 2013.

Affordability is likely to become a big issue for tenants as house rents stayed steady in Darwin but apartment rents declined despite the vacancy rate being historically low.