A shortage of stock and high demand for houses, particularly in regional areas, has led to a dramatic increase in Australia’s rental prices, despite quarterly growth rates starting to ease in the three months to September.

CoreLogic’s quarterly Rental Review, released today, shows the national rental index increased 1.9% during the September quarter compared to a 2.1% rise in the June quarter. National rental rates are 8.9% higher year-on-year, the highest annual growth in dwelling rents since July 2008.

CoreLogic’s Research Director Tim Lawless said several factors were influencing rental growth including a desire for detached housing and lack of supply due to previously historically low levels of investor activity.

“Renters are clearly looking for lower density housing options, with house rents rising at more than double the pace of units rents over the past year, however this trend is starting to narrow, with national house and unit rents rising at the same rate over the September quarter (1.9%),” Mr Lawless said.

“Another factor that may be contributing to rental demand is that more renters are working from home, which could be driving a trend towards smaller rental households as tenants look to maximise their space and working environment during COVID.”

Mr Lawless said private sector investors are the largest contributor of rental housing and up until January 2021 made up only 23% of housing market activity. The proportion of investors entering the market has begun to increase with this buyer segment accounting for 31% of mortgage demand in August.

Regional dwelling rents rose 2.2% over the September quarter compared to capital city dwelling rents, which increased 1.7% over the same period. Regional Australia’s annual rate of rental growth of 12.5% in September 2021 is the highest annual figure on record, with CoreLogic rental index figures commencing in 2005.

In comparison, the combined capital cities recorded annual rental growth of 7.5% over the same period, the highest annual growth rate for the combined capitals since January 2009.

“Demographic data is showing a clear trend towards regional population growth, driven by a combination of more people leaving cities for the regions, but also fewer people moving from the regional areas to the capitals,” he said.

“With regional housing rents rising 12.5% over the past year at a time when household incomes have hardly budged, it’s likely that rental affordability is becoming a lot more challenging in some of the most popular regional markets.” 

The strongest quarterly rental growth was recorded in Brisbane (2.6%) and Sydney (2.3%), while Perth, which recorded a surge in rental growth earlier in 2021, saw rates increase 0.3% during the September quarter.

Adelaide remains Australia’s cheapest capital city for rentals, with typical dwelling rents of $440p/w compared to Canberra’s rates, which are the most expensive in the country at $633p/w. Melbourne, is Australia’s second more affordable rental market, with a typical dwelling costing $450p/w to rent, or just $9.30 a week more than it costs to rent in Adelaide.

For the first time CoreLogic’s Rental Review includes a list of the top 30 most expensive and affordable rental suburbs for each capital city as well as key rent and gross yield statistics.

For more information, visit www.corelogic.com.au.

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