Rents across Australia have risen at the fastest rate in at least 15 years, according to Corelogic’s Rental Value index.
Annual rent increases, which are calculated monthly, topped 10% in late 2022 and early 2023. The last time rents increased at such a pace was in 2007 during the global financial crisis, when peak annual rent growth reached 9.7%.
But the proportion of household income spent on housing is currently much higher than in 2007. The CPI rent index in March 2021 – when the current wave of rental increases began – was 55% higher than it was in June 2005, the equivalent point before the 2008 peak.
“These increases today come on top of an already very significant level of cost,” says Dr Michael Fotheringham, the managing director at the Australian Housing and Urban Research Institute.
Of the 40% growth in the rental value index in the past 10 years, most of it (29%) has occurred since March 2020.
Maiy Azize, a spokesperson for the Everybody’s Home campaign to fix the housing crisis, agrees the problem is not just the pace of growth, but that it is coming off a high base.
“A 10% increase in one year is bad – nobody wants to see the rent go up – but the problem is when people’s rents are going up consistently, every single year, in large amounts,” Azize says.
Rents have rarely ever gone down in the past decade and a half, according to the rental value index. The Australian Bureau of Statistics’ consumer price index, which has tracked housing costs as part of inflation for about 50 years, tells a similar story.
The latest national CPI rent data shows a 6% increase in rental prices for the year to June, compared with a peak of almost 8% in June 2008. There was a slight decrease during the pandemic, however.
Property trends to “plateau rather than drop” according to Fotheringham. And so while individual cities may have had periods where rents became more affordable, it would take something large like the pandemic for it to show up nationally.
Even as the national averages hit new heights, they may obscure a different trend in particular locations or in unique circumstances. There really isn’t a national rental market – but thousands of smaller ones, differing on things like price levels, location and factors about the properties themselves such as the number of bedrooms.
While the rental markets Sydney and Melbourne are currently taking off, Darwin and Canberra have more recently seen declines. In fact, many capitals saw declines in rental prices in the early stages of the pandemic, while the opposite was true in the regions. Much of that now appears to be reversing.
But Azize says these averages also miss what is happening to people on lower incomes. Anglicare’s latest Rental Affordability snapshot found just four rentals out of over 45,895 national listings were affordable for a single person receiving the jobseeker payment.
“Even in the pockets of the country where you’ve seen [rents] dip a little bit, that hasn’t been in the lower end of the market.”
Experts point to several factors driving rent increases, including shortages of building materials slowing down construction, a lack of affordable and social housing, increasing numbers of short-term rentals, recent higher-income growth for some, the trend towards smaller households and a fresh surge in migration.
“Our rental market has been built this way for decades, we just didn’t see it throughout the 2010s because interest rates were low and investment properties were plentiful,” says Eliza Owen, the head of research at CoreLogic.
“We need to change the way we think about the rental market long term.”
