The latest CoreLogic monthly chart pack revealed national rental rate only grew a modest 0.1% over the 12 months to July, the slowest in three years.
Though tenants across Australia were paying 7.8% more in rent last month, the pace of price increase had gone down from the recent peak of 8.6% in April.
CoreLogic Australia economist Kaitlyn Ezzy noted the easing marks a stark contrast to the 39.7% surge in rents – equivalent to around $180 – recorded over the past five years.
“July’s small rise in national rents signals a broader cooling trend across the country and will provide some renters a much-needed respite after years of high demand and steep increases,” she said.
The overall slowdown is largely driven by a reduction in growth rates in the capitals, from 9.7% in February to 8.0% in July
Results were varied across the capital cities, with rents rising 0.6% in Adelaide, and 0.3% in Melbourne and Perth.
In contrast, rents have declined in Sydney and Brisbane, both down 0.1%, and Hobart (down 0.3%).
Growth was flat in Darwin and Canberra.
Ms Ezzy said the varied outcomes highlight the affordability disparity in major cities.
Is Australia’s red-hot rental market really cooling now?
“With tenants unable to borrow more to cover rent, many are turning to alternatives such as shared housing, relocation to more affordable areas, or leaving the rental market altogether and buying their own homes,” she said.
In other words, in cities with high rent prices like Sydney and Brisbane, tenants opt to seek other alternatives like getting roommates.
According to the Real Estate Institute of Queensland (REIQ), vacancy rates in the Sunshine State have slightly edged up to 1% in the June quarter.
Of the 50 local government areas and sub-regions covered in REIQ’s report, more than half had a lift in vacancies compared to the previous quarter.
And where people move, prices go up.
CoreLogic found annual rents surged across all regional areas except Regional NT.
Regional WA posted the strongest gains of 10.6%.
“Regional areas are benefiting from lifestyle changes, relative affordability, and migration trends,” Ms Ezzy said.
More adults are renting with roommates
CBA, in a separate report, found that an increasing number of the adult population are living in shared houses in response to mounting rental price pressures.
Though admitting the data is “choppy”, the economics team of Australia’s biggest bank reported that around 5% of adult Aussies are living in share houses, up from 4% in 2020-2021.
This translates to approximately 200,000 more individuals living with roommates.
Additionally, there has also been a noted increase in those living with family members.
CBA also found a sharp decline in the share of the population living with just their partner.
“The rapid increase in dwelling and rent prices could be delaying when couples move out together, instead choosing to remain at home or in share houses,” CBA economist Stephen Wu said.
Just under a quarter of all couple‑only households are aged 34 years or younger.
On the other hand, single households are most prevalent among those 65 years and older, accounting for 42% of the total number of individuals in this home arrangement.
By comparison, the 25-34 age cohort only makes up around 12% of those living alone.
Renters transition to homeowners
The high cost of renting is likely motivating more people with the financial means to service mortgage repayment and job security to buy their first home instead, Ms Ezzy said.
New housing lending to first-home buyers rose 1.5% to $5.3 billion in June, to comprise 29.2% of new owner-occupiers.
However, it was investors who are currently driving the growth in home lending, with new investment loans excluding refinancing up by 2.7% to $11 billion.
Ms Ezzy said investors are more motivated by capital gains rather than high rental returns.
Despite an easing in net overseas migrations and a deceleration in rental growth, substantial relief for the rental market seems unlikely in the short term.
“Low supply will likely continue to put upward pressure on rents, albeit at a slower pace,” she said.
Photo by HiveBoxx on Unsplash
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