After years of acceleration, rental prices appear to be easing slightly. The rate of growth slowed from 1.7% to 1.3% in the June quarter, reaching preandemic averages in Melbourne, Candera, and in Sydney. But Hobart and Darwin have seen significant increases, both picking up speed since last year. The median increase across the country is just over $1,100 a year. Well, Sydney remains the most expensive place to rent a property.
The median weekly rent is just shy of $800. Despite the slowdown, places to rent are in short supply. The vacancy rate is at a near record low of 1.6%. Through June, there were about 100,000 rentals listed across the country.
That’s nearly 30,000 fewer than usual for this time of year. And some experts say the slowdown could help pull down inflation, increasing the likelihood of an interest rate cut when the Reserve Bank meets next month.
Rental growth easing
Totality economist Caitlyn Ezie says while the market is stabilizing in some areas, others appear to show early signs of a reaceleration in rental costs. So looking at the pace of growth in rental markets, we have seen a continued easing in that that rate of growth and that has largely happened in the absence of any supply response. So vacancy rates is still holding really quite low at about 1.6% nationally. Uh and so instead that easing in the pace of growth has been driven by demand factors. So we’ve seen the net overseas migration has continued to normalize and that has reduced uh rental demand. And then we’ve also seen a bit of an uptick in the average household size. So people renting out that extra spare room, staying home with mom and dad that little bit longer as a way of uh handling the additional rental burdens that we’ve seen uh with the the increase in rents over the past couple of years.
And this comes after, as you say, years of solid rental gains, doesn’t it? Can you give us a a sense, remind us how much rents have gone up over the last few years?
Yeah. So over the last 5 years we’ve seen rents increase by about 43% nationally. Um that’s range from about sort of 19 uh% in in CRA up to almost 70% in Perth. Uh at the national level that increase is equivalent to an increase of about $199 per week or about $10,000 extra dollars per year spent on rents.
Hobart and Darwin
So what’s happening uh in Hobart and in Darwin, Caitlyn? Rental costs there have risen by the most nationally. Why those two markets seeing such an acceleration?
Yeah, over the past year, Hobart and and Darwin have seen rates up by about 5 6%. Um, they have uh over the past few years seen much weaker rental growth compared to your larger and midsize capitals and in fact in some cases saw uh rents go backwards is they are playing a little bit of catch-up at the moment. aren’t seeing that stronger rate of growth compared to the the larger and midsize capital cities.
So overall then Caitlyn is this a reset of the rental market that we’re seeing now or do you anticipate that rents will take off again?
So it’s difficult to say. Um broadly speaking we are seeing some capitals fall back in line with their precovid sort of average rate of increase. So Sydney, Melbourne, CRA for example. Um but we are seeing some early signs that some markets like say Brisbane for example or or high-end markets high-end unit markets across Sydney are starting to see that first early signs of a bit of a reacceleration. So their 12-month growth say across Brisbane went from uh 3.5% over the 12 months to May up to 3.8% over the 12 months to June.
So very early days, but we could be starting to see a little bit of an uptick in that pace of growth across a few select markets.
Okay. And finally, are these current lower rental price rises a precursor of good news for homeowners, do they add to the case for a rate cut next month?
Yeah. So with the pace of rental growth normalizing, it does add a bit of extra uh uh weight to uh the case for a rate cut. is a fairly large portion of the CPI basket. Uh that being said, of course, with that slight uptick in a few uh markets uh over the past sort of month or so, it does raise maybe some concerns um as to whether we will continue to see rents decrease from here the early days. So, it it’s uh definitely something to watch, but uh we would expect that the pace of growth will continue to ease.