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  • Writer's pictureGM Homes

Australia's capital cities record strongest annual rental increase in history

A surge in overseas migrants and international students coupled with a significant shortfall in rental listings has led to the strongest annual rental increase on record for Australia’s capitals.

In April, CoreLogic's national dwelling rental index reported a 0.8% increase, resulting in a 2.8% increase over the past three months and a 10.1% increase over the year. The annual rental increase of 11.7% in the combined capitals was a new record and was mainly driven by an increasing demand for capital city units. The following are some key points for this month:

  • The lack of balance between the demand and supply of rental properties remains the primary factor driving up capital city rents. As of April 30th, the total supply of capital city rental listings was -20.9% below last year's level and -39.8% below the five-year average.

  • Vacancy rates in the capitals, with the exception of Hobart and Canberra, remain at near-record lows and well below the typical balanced rental market rate of 3% to 5%.

  • Except for Darwin (-0.3%) and Canberra (-0.2%), all capital cities recorded an increase in dwelling rental values in April, with Melbourne (1.4%) and Sydney (1.3%) experiencing the highest rental appreciation, followed by Perth (1.3%) and Adelaide (0.8%). Regional SA (1.1%) recorded the highest monthly rental increase across the rest-of-state markets, followed by regional Queensland and regional WA (both at 0.6%).

  • As internal migration rates normalise and vacancy rates move away from recent record lows, momentum is clearly easing across regional rental markets.

  • Regional rents increased 1.3% over the past three months and 6.0% over the year to April, down from the peak of 12.5% over the 12 months to November 2021.

  • Adelaide ($534 p/w) has overtaken Melbourne ($535 p/w) as the most affordable rental capital, while Sydney ($711 p/w) remains the most expensive capital after displacing Canberra three months ago.

  • Unit rents across the capital cities continue to grow at a faster pace than house rents, increasing 1.6% and 0.9% in April, respectively. The strong demand from migrants and foreign students, who typically settle first in medium to high density housing, as well as a preference for more affordable accommodation, are the reasons behind the continued preference for the unit sector.

  • Sydney and Melbourne continue to record the strongest growth in unit rents across the capitals, with both cities recording a new peak rate of growth in both quarterly and annual trends in April.

  • For the rolling quarter, Sydney's unit rents increased 5.8%, while Melbourne's unit rents increased 5.0%, and over the year to April, they increased by 19.1% and 15.2%, respectively.

  • Renters are unlikely to receive much relief in the short to medium term, as the flow of migrants is expected to remain high, and the supply of rental properties is expected to remain low. Due to the fact that new unit approvals have been below average since 2018, the rental market will likely continue to experience supply issues over the medium to long term.


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