Why rents keep rising across most of Australia

Australians looking to rent a home have been facing steadily increasing costs, with CoreLogic data showing national rents jumped 8.3% in 2023, following increases of 9.5% in 2022 and 9.6% in 2021.

What's behind this relentless rise?

Well, at the heart of the issue, lies a stark imbalance between supply and demand. Australia is experiencing a critical shortage of rental properties, just as demand from renters reaches unprecedented levels. More people are competing for fewer homes, driving prices up.

You can see this clearly in the national rental vacancy rate which stood at just 1.3% in December, according to SQM Research. This figure is well below the 2-3% range which is typically considered a sign of a balanced market. 

Meanwhile, Australian Bureau of Statistics (ABS) data shows in the 12 months to June 2023, Australia's population grew by 624,145 people, largely driven by a record high of 518,087 from net overseas migration. 

Typically, newcomers to Australia tend to rent, boosting demand for rental properties.

Looking ahead, there's little relief in sight for renters in 2024. 

Addressing the root cause of the problem – insufficient housing supply – requires a big ramp-up in construction activity. 

However, recent data from the ABS shows the opposite: dwelling approvals are at their lowest in a decade, having fallen 9.5% in December to be down 24% year-on-year. 

To make matters worse, December’s decline was largely attributed to fewer approvals for apartment blocks and multi-unit homes – with these falling 25.3% over the month to be 19.0% down when compared year-on-year. 

Moreover, the Centre for Population forecasts that Australia's population will grow from 26 million in June 2022 to 30.9 million by June 2034. This projected population increase will likely fuel continued demand for housing, adding yet more pressure to the already strained rental market.

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