Australian rents have jumped by as much as 27.5 per cent over the past 12 months, marking the largest increase since 1994.
According to the Real Estate Institute of Australia (REIA), Real Estate Market Facts report, rents climbed 10.9 per cent for three-bedroom houses across the country in the past 12 months, while two-bedroom dwellings increased a staggering 20.7 per cent.
Sydney was the hardest hit by the rent increases with rents for two-bedroom dwellings soaring 27.5 per cent and rents for three-bedroom houses increasing 10.7 per cent.
Melbourne also saw a sharp rise in the cost of two-bedroom dwellings, increasing 23.8 per cent, while Perth saw the steepest rise in rents for three-bedroom houses, up 15.6 per cent.
REIA President Hayden Groves said Australian housing rents had soared at record levels over the past 12 months, highlighting the ongoing rental crisis tenants are currently facing.
He said despite surging rents, policies to try and limit rental increases could further harm the market.
“Policies that artificially limit market rents, such as rent freezes, would make this challenge significantly worse as landlords and build-to-rent providers would inevitably quit the market,” Mr Groves said.
He said this was the highest annual increase since REIA records started in March 1994, with two-bedroom apartments in Sydney now renting for $650 per week, which is on par with a house in Canberra.
“In the March quarter, the median rent for three-bedroom houses increased in all capital cities throughout Australia,” he said.
“In the 12 months to the March quarter, the median rent increased in all capital cities. Brisbane had the largest annual rise at 15.6 per cent in this category.”
Mr Groves said the median rent for two-bedroom other dwellings, such as units, increased in all capital cities except Adelaide and Canberra, where it remained stable.
“Melbourne had the largest growth over the quarter at 13 per cent,” he said.
“In the 12 months to the March quarter of 2023, the median rent for two-bedroom other dwellings increased in all capital cities.
“For house rents in the March quarter, the weighted average median rent for three-bedroom homes in the eight capital cities increased to $536 per week, a quarterly increase of 3.9 per cent.
“The median rent for three-bedroom houses increased in all capital cities.”
“Adelaide had the highest quarterly increase of 5.3 per cent and Canberra had the lowest increase of 0.3 per cent.
According to Mr Groves, the weighted average median rent for two-bedroom other dwellings increased to $543 per week, a quarterly increase of 8.2 per cent.
“The median rent remained stable in Adelaide, Canberra and Hobart but increased in all other capital cities,” he said.
Mr Groves said vacancy rates across the country sat well under market parity of three per cent in every state and territory.
Vacancy rates decreased in Sydney (1.4 per cent), Melbourne (2.3 per cent), Brisbane (0.8 per cent), and Darwin (2.1 per cent) and increased marginally in Perth (0.7 per cent), Canberra (1.7 per cent) and Hobart (1.3 per cent) but remained extremely competitive for tenants looking to secure accommodation.
“Rental supply remains the fundamental driver of low vacancy rates across Australia and until more rental homes are introduced or household fundamentals radically change, it is expected these trends will continue in future quarters as population grows,” Mr Groves said.
Moderate price growth
According to the report, house price growth was more moderate, with the weighted average capital city median price increasing 0.1 per cent for houses but decreasing 0.2 per cent for other dwellings over the past 12 months, as the impact of rising interest rates weighed on prices.
“The weighted average median house price for the eight capital cities increased to $952,648 over the quarter,” Mr Groves said.
“The median house price increased in Sydney, Adelaide and Darwin, remained stable in Perth, but declined in Melbourne, Canberra and Hobart. Increases ranged from 0.4 per cent in Adelaide to 3.7 per cent in Darwin.”
Sydney continued to have the highest median house price at $1,459,856, which is 53.2 per cent higher than the national median.
While Perth, at $550,000, has the lowest median house price across Australian capital cities, 42.3 per cent lower than the national median.
“Over the 12 months to the March quarter, the weighted average capital city median house price decreased by 7.8 per cent,” Mr Groves said.
“For other dwelling sales, the weighted average median price for the eight capital cities decreased to $623,398, a quarterly decrease of 0.2 per cent.”
Mr Groves said Sydney’s median price for other dwellings continued to be the highest amongst the capital cities at $758,664, which is 21.7 per cent higher than the national median.
While Darwin, at $390,000, has the lowest median price for other dwellings across Australian capital cities, 37.4 per cent lower than the national median.
Over the 12 months to the March quarter, the weighted average median price for other dwellings for the eight capital cities decreased 4.8 per cent.
Mr Groves said the numbers demonstrate the recovery of house prices since the RBA began its rapid rate increases and highlight rental affordability as a looming challenge due to ongoing supply shortages.
He said the underlying problems in Australia’s property market remain the underutilisation of existing housing stock coupled with not enough homes being built to meet population growth demand.
Mr Groves said the country needed to make better use the homes we already have built and build more houses
“Until pragmatic, nation-wide solutions to supply constraint begin, including support for the weakened construction sector, it is likely that current trends in rental supply and housing affordability will continue in future quarters,” he said.