Figures show that rents across Australia are rising at the quickest pace since 2008 amid interest rate increases and soaring inflation. This comes as landlords seek to recoup their borrowing costs, putting immense financial pressure on renters across the country. Also contributing to the fastest rent increases in 14 years is that more households are being formed and fewer homes are being built.
The data comes from the quarterly rental review by research company CoreLogic. The figures show that the national rental index rose by 0.9% in June. The data also showed that the index had increased by 2.9% in the second quarter. In capital cities, rents are now 9.1% higher than a year ago. The year-on-year increase is even steeper in regional areas with a rise of 10.8%.
CoreLogic research analyst, Kaytlin Ezzy, said: “This sustained period of strong rental growth has seen national dwellings record the highest annual growth in rental values since December 2008.”
According to the data, the most expensive rents are in Canberra, where the typical rent for a home is $690 per week. Typical rents in Sydney are slightly lower at $643 per week; in Darwin, the median rent stands at $565 per week.
An impact on affordability
Industry experts have stated that the soaring rental costs across the country will have a massive impact on affordability, but landlords are increasing rents to cover their own increased outgoings.
Nicola Powell, chief of research and economics at Domain Australia, said: “If an investor has higher levels of costs associated with their investment property, if they’re able to pass that cost on through higher rents, they will do that.”
She added that the rising demand for rental homes had also impacted the sharp rise in rents. Data shows that rental property vacancy rates have dropped since the beginning of this year, and the national average now stands at 1%.
Powell stated, “Generally, when vacancy rates go below 2%, it’s a landlord’s market, at around 3% it’s balanced and above 3% it favours tenants. What we’ve got right now is a landlord’s market across every single capital city in Australia.”
Another factor that has affected the surge in rental costs is a reduction in the number of properties being built. Rising borrowing costs have severely impacted the development of new properties, which has put increased pressure on the rental market with rising demand for rented homes. Moreover, one industry expert said there was no sign of any reprieve on the cards concerning rocketing rents. Louis Christopher, managing director of property data firm SQM Research, said: “Rental vacancy rates continued to tighten across the country and there is nothing yet in the data that would suggest we are about to see a reprieve. The national rental crisis continues on unabated and as a result, asking rents are skyrocketing.”