Rents continued to climb across Australia in the June quarter, particularly in the biggest cities, with a median unit costing more to rent in Sydney than a median house in every other state capital, data from Domain shows.
A record migrant intake that will swell the nation’s population by 715,000 people over two years and a return of overseas students and temporary visa holders will add to the “rental pressure cooker”, Domain said in its quarterly report. About 127,000 additional dwellings will be needed this financial year alone.
Nicola Powell, Domain’s chief of research, said Sydney’s 8.1% increase to $670 in median weekly rentals in the June quarter was “an eye watering leap”, the fastest quarterly spurt in nearly 20 years of data. That level was also up 27.6% or $145 from a year earlier and exceeded the median cost of renting a house in every city other than Canberra.
“It’s highlighting the extreme affordability issues that are presented in the Sydney rental market,” Powell said, adding that many tenants were approaching “an affordability ceiling”.
Median rents for units surged in other major cities too, with Melbourne’s rising 22% in the past year to $500 a week. Perth wasn’t far behind, with median units a fifth more costly than a year ago, reaching $480 a week.
Housing rental increases were more subdued compared with units, with Sydney also leading the way in the past quarter. Median houses rents in the harbour city reached $700 in the April-June period, up 6.1% from the previous three months to be 12.9% higher than a year ago.
On annual basis, houses in Melbourne rose 13% to $520 in rent a week, while median house in Perth advanced 16% t0 $580 – the same cost as Brisbane.
Rent increases have been one of the largest contributors to the inflation rate, making the job of the Reserve Bank to curb prices more difficult. House and unit rents in Sydney, Melbourne, Brisbane, Adelaide and Perth were now at record highs, as well as house rents in Darwin, Domain said.
Rental vacancy rates remain at a record low of just 0.4% in Perth and Adelaide, and 0.8% in Brisbane, Powell said. Melbourne’s 1% vacancy level was in line with the national average, while Sydney’s was at 1.2%.
Hobart saw its median house and units rents fall modestly in the June quarter with a vacancy rate of 1.3%.
Canberra’s houses, too, were 2.2% cheaper than three months earlier to rent. With the Australian Capital Territory’s vacancy rate at 1.9%, up from 0.8% a year ago, the national capital’s market was close to being in balance, Powell said.
“Net overseas migration doesn’t weigh in on a market like Canberra as it does in Sydney, Melbourne and Brisbane,” she said.
The cost of renting units rather than houses had lately narrowed in much of the country, with the jump in migration one factor. Migrants tend to prefer inner-city locations when they first arrive, particularly the medium- and high-density housing found in ares such as Melbourne’s Docklands and Southbank, Powell said.
Domain said while Australia was “likely to remain a landlords’ market for some time”, conditions for some tenants may start to improve.
“There are signs that the rental market is losing some of its pressure and turning a bit of a corner,” Powell said.
Some stressed renters may be taking up a suggestion by the RBA governor, Philip Lowe, in May that more people should consider sharing a house.
“We probably are already seeing people going into a house share or people deciding that they can opt for a smaller dwelling,” Powell said, adding that would be reverse a trend towards fewer residents per dwelling during the height of the Covid pandemic.
