Spiking rents have seen 57 suburbs rise more than 20%
Apartment rents have soared up to $11,000 over the past 12 months, according to new data from CoreLogic.
The increases have seen rents in 57 suburbs rise more than 20%, according to The Australian Financial Review. The increases come as vacancies dropped to a new low of 0.9% across the combined capital cities in February.
The rent spikes have spurred rising demand for the less expensive high-density sector as renters sacrifice space for affordability, CoreLogic research director Tim Lawless said.
“Rental affordability pressures may be forcing a transition of demand towards higher-density rental options, where costs tend to be lower,” Lawless told AFR. “Additionally, the strong rebound in foreign student and international migrant arrivals would be adding to rental demand, particularly in inner-city precincts as well as areas close to universities and transport hubs.”
Suburbs in Sydney’s inner south, eastern suburbs and inner west topped the list for rent rises, led by the Sydney-Haymarket-The Rocks area, where unit rents spiked by 27.8% to $969 a week – an annual gain of $10,972.
Rents in the Waterloo-Beaconsfield, Kingsford, Redfern-Chippendale and Arncliffe-Bardwell Valley areas rose by more than 27%, or an average of $171 per week, AFR reported.
Melbourne saw the fastest rent rises for apartments over the year, with rents climbing 38%.
Five other inner-city areas showed rent rises of more than 21%, including Southbank, Carlton, Docklands, North Melbourne and South Melbourne.
House rental growth slows
While units have seen big gains, rental growth for houses has slowed as worsening affordability and a skyrocketing cost of living have impacted tenants’ budgets, Lawless said.
“We have already seen some evidence that rental growth is topping out, especially in the more expensive low-density sector, where rental growth was much stronger through the pandemic,” he told AFR. “This easing in rental growth has nothing to do with a supply response or less overall demand, it probably has more to do with renters reaching a ceiling on what they are able or willing to pay. With rental growth substantially outstripping incomes over the past few years, it is likely more renters will be looking for alternatives to ease their rental payments.”
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Canberra showed the sharpest deceleration in house rents, dropping from a 10.5% annual increase at the height of the COVID-19 pandemic to an increase of just 0.8% over the year to February, AFR reported.
In Sydney house rents stabilised at 8.9% annual growth over the past three months, down from the pandemic high of 10.2%. All other capital cities except Melbourne have posted slower house rent gains in recent months.
But with vacancy rates hovering around record lows, Lawless said rents will probably continue to rise at least through the remainder of 2023.
“Over the short to medium term, the rental supply outlook is looking pretty glum,” he told AFR. “From a new dwelling perspective, approvals are at their lowest level in more than a decade.”
Private-sector investment is also on the decline, with investment home loan figures falling since early last year.
“Against this scenario of limited new rental supply, demand looks set to rise further, based on the influx of overseas arrivals, amplified by an additional 35,000 permanent migrants relative to prior years,” Lawless said.
Suburbtrends founder Kent Lardner told AFR that vacancies would likely continue to fall as rental demand continued to outstrip supply.
“The rental supply in the near to medium term is alarming,” Lardner said. “Building approvals are well below population growth rates, which creates a significant problem for renters in the coming years. Based on my analysis of building approvals over the last five years and comparing those to population growth, around 95% of suburbs nationally will have inadequate rental supply in the coming years.”
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