Rents are likely to keep rising for the rest of this year with little chance of relief in 2024 as strong population growth outstrips the supply of new houses and units, property experts say.
CoreLogic figures show Melbourne house rents rose by almost 12 per cent for the year to August 31, with unit rents in the southern capital rising almost 15 per cent.
Huge population growth and the lack of supply of new housing will see rents continue to rise.Credit: Jessica Shapiro
In Sydney, house rents have risen by almost 9 per cent over the period, with unit rents in the harbour city rising almost 17 per cent.
The big rise has seen an increase in the share of gross median household income required to service new rents, with CoreLogic data showing in June this year it was almost 31 per cent, the highest level since June 2014.
Andrew Wilson, the chief economist at My Housing Market, says it is a problem that is looking to be intractable. He says the only constraints on rents are renters’ capacity to pay.
The recent initiatives by the federal and state governments to increase supply, including rental properties, will take some time and, even then, the planned numbers of new builds are not nearly enough to meet demand, he says.
“[High rents] are something we are going to have to live with, and governments can only really help those renters who are marginalised,” he says.
Angie Zigomanis, head of data and insights at Quantify Strategic Insights, says it is about supply and demand and a big part of the demand is the return of net overseas migration.
Net immigration for the year to June 30 is widely tipped to come in at close to half-a-million, when the official figures are released.
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“At the end of the day, people need a roof over their head and, for those coming from overseas, a large percentage of whom come to Sydney and Melbourne, that’s adding to rental demand,” he says.
Zigomanis says apartment construction is “still pretty weak”. More apartments, particularly those located fairly close to the centres of our big cities, are really what is needed, he says.
Louis Christopher, the founder of SQM Research, says to meet Australia’s population growth, about 260,000 dwellings nationally would have to be completed over this calendar year, but we are on track to only build about 160,000.
He says rents will likely continue to rise – perhaps by 2 to 4 per cent during the final three months of this year.
Eliza Owen, the head of research at CoreLogic, is a bit more positive about the outlook for renters, as there have been some, mostly small, falls in rents over the three months to August 31, but that has mostly been in the more expensive suburbs of Sydney and Melbourne.
The migration factor is one that will add to demand, but there are factors that can help to alleviate the pressure on rents, such as more students sharing a house, Owen says, and as rents rise, more renters could move to more affordable areas.
“I think that annual pace of rent growth is going to keep easing, though rental affordability challenges are likely to persist,” Owen says.
CoreLogic has identified suburbs with the lowest rents within 20 kilometres of the centres of Sydney and Melbourne.
For Melbourne, they include houses in Deer Park, Albanvale, Broadmeadows, Laverton and Albion – all under $444 a week. Cheapest rental units in Melbourne include Albion, Deer Park, St Albans, Broadmeadows and Thomastown at under $421.
Sydney’s cheapest suburbs for house rentals include Auburn, Regents Park, Granville, Berala and South Granville – at under $689 a week. Cheapest rental units in Sydney include Wiley Park, Punchbowl, Lakemba, Regents Park and Roselands at under $525.
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