Rents hit record highs across Australia
Australia’s property boom might be drawing to a close. But in its place comes an unusually tight rental market that saw the national vacancy rate plummet to 1% in March, according to SQM Research, its lowest point since 2006.
The vacancy rate has stayed that low ever since, barring the odd minor fluctuation.
As the national vacancy rate measures the share of untenanted rental properties, that means only one out of every 100 rentals is currently empty. So it can be incredibly hard for a tenant to find a place to call home.
That puts the balance of market power firmly in landlords’ hands, which, naturally, puts upwards pressure on rents.
You only have to glance at the sea of green in Domain June’s quarterly rent report to see the impact the ultra-low vacancy rate is having on the market.
In fact, rents hit record highs over the June quarter in every one of Australia’s capital cities, except Darwin, with the country seeing its strongest annual rental growth in 14 years.
Those weren’t the only records to fall either.
Both house and unit rents over the combined capitals have now recorded their longest continuous stretch of rental price growth, after:
House rents rose for the fifth consecutive quarter
Unit rents rose for the fourth consecutive quarter
As a result, on a national basis, rents have recouped everything they lost since the pandemic … and then some.
So what’s causing the extraordinarily tight rental conditions? Well, as always, it largely comes down to the balance of supply and demand.
Fewer rental properties are available
As prices exploded over the property boom, it became harder for first-time buyers to get on the ladder – locking them into the rental market for longer. So fewer rental properties have become available.
At the same time, some investors sold their properties to cash in on the capital gain, contributing to the lack of supply.
However, the tight vacancy rate isn’t the only factor driving up rates. You also need to consider the impact of the Reserve Bank of Australia’s recent cash rate hikes. These rate increases are making the cost of borrowing more expensive, which some landlords are passing on to their tenants in the form of rent increases.
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