Data from PropTrack showed total rental listings in the December 2023 quarter fell 4.7% year-on-year, pulling down its decade average to 20.7%.
Throughout the capital cities, the number of new properties that became available for rent also declined by 5.7% over the same period. Similarly, regional markets finished the year with a 1.8% drop in rental listings.
The PropTrack Rental Report December 2023 also found rental listings that first came into the market in the quarter were at a record low, plummeting 4.6% annually, to sit 30.2% below the decade average.
Citing persistent low supply amid rapidly increasing demand, PropTrack director of economic research Cameron Kusher expects tough rental conditions to continue over the short term, with major capital cities becoming more competitive in 2024.
“Given ongoing strong population growth and the low volume of new rental stock under construction, it is likely that competition for rental stock will remain significant,” he said.
Australia’s rental crisis deepened as building approvals and commencements trailed behind migration-driven rental demand.
“Over the 12 months to June 2023, the national population increased by a record of 624,145 people. Of these, a record high 518,087 were from net overseas migration,” Mr Kusher said.
RBA research indicates the average household size decreased during the pandemic from 2.55 persons to 2.48, and about 120,000 extra dwellings were needed to accommodate this.
Low vacancies pushing rents up
On a national level, the vacancy rate slid further down to 1.1% in December, lower than the 1.3% recorded in the same period.
Similarly, the vacancy rate across combined capital cities was at a critical level of 1.2%; regional markets’ sat at 1.1%.
A vacancy rate of 2-3% is considered a healthy market where supply meets demand. Anything under 2% is considered tight.
“Prior to the pandemic era, the rental vacancy rate nationally was typically around 2.5%, highlighting just how much conditions have tightened,” Mr Kusher said.
The tough competition for rental properties has continuously pushed prices up, with median advertised rents in the December quarter reaching $580, or 11.5% higher throughout the year.
Renters in capital cities were dealt with a higher median weekly rent of $600 in the same period. Those in the regional markets pay an average of $500 per week.
“The strong demand and high cost of renting are likely to see renters make trade-offs, such as moving further away from their preferred locations, choosing smaller properties, or sharing accommodation with other people,” Mr Kusher said.
Slowing down rent price growth rate
While rents may not come down anytime soon, there may be some relief for renters this year, Mr Kusher said.
A reprieve may also come – later rather than sooner – once the easing cycle of the cash rate begins, which economists believe will not happen until the second half of 2024.
An RBA cut is tipped to ease pressures in the rental market by stimulating investor confidence with lower interest rates on investment home loans, which could then translate to increased supply.
Despite last week’s modifications in the stage three tax cuts, economists maintain their forecast of a rates hold in the next RBA meeting on 5-6 February. Should the central bank cut, hike, or keep the rates steady depends largely on the December consumer price index the ABS will release on Wednesday.
Given the current circumstances, Mr Kusher believes the focus must be shifted to providing housing to ease rental growth.
“There has been a rebound in new investor lending this year, however, it is not enough to sufficiently improve stock levels,” he said.
“There is a critical need for additional housing particularly in the major capital cities. Serious consideration needs to be given to the financing of these projects and the capacity to build the volume of housing we need.”
Photo by Francesca Tosolini on Unsplash
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