1. Rental prices across Australia rose by 11.5% in 2023, with Perth, Melbourne, and Sydney experiencing the highest rental growth.
2. Rental vacancy rates in Australia tightened over the course of 2023, although there was a slight easing towards the end of the year.
3. The tightening rental market can be attributed to the influx of overseas migrants since borders reopened, which has increased rental demand and price growth.
4. Renters can expect difficult conditions in 2024, with rents continuing to grow quickly and low vacancy rates.
5. As Australia’s population is projected to grow rapidly in 2024 and new home construction is declining, rental vacancy rates will remain tight and rental inflation high. Renters may opt for share housing to manage the increasing costs.
Analyzing the Impact of Rising Rental Prices and Tightening Market Conditions
Recent data released by PropTrack reveals a significant rise in rental prices across Australia, with an 11.5% increase in 2023. This surge, led by the combined capital cities at 13.2%, has placed considerable pressure on household budgets. Perth, Melbourne, and Sydney experienced the highest growth in capital city rental rates, with increases of 20%, 18.3%, and 16.7%, respectively. Adelaide and Brisbane also saw notable rises in rental prices.
Rental Vacancy Rates and Market Dynamics
The rental market tightened over 2023, although there was a slight easing towards the end of the year. National rental vacancy rates rose marginally in December to 1.12%, but overall, they declined by 0.13 percentage points over the year. Separate data from SQM Research, compiled by Justin Fabo at Antipodean Macro, indicates that residential rental vacancy rates have reached new lows in Sydney and Melbourne, with tight conditions prevailing across all major areas.
Factors Driving Rental Market Tightness
One of the primary drivers of this market tightness has been the record net overseas migration into these markets. The influx of overseas migrants since the reopening of borders has significantly boosted rental demand and price growth.
PropTrack’s Warning for Renters in 2024
PropTrack cautions that renters will continue to face challenging conditions in 2024, with rents expected to keep rising rapidly amid strong demand and very low vacancy rates. Many tenants are likely to allocate an increasing portion of their income to rent, intensifying the strain on household budgets. With the number of vacant properties remaining low, tenants will face ongoing challenges in finding available rental properties.
Population Growth and Construction Trends
Australia’s population is forecast to grow at a historically rapid rate in 2024, while new home construction is declining. This scenario suggests that rental vacancy rates will remain tight, and rental inflation will continue to be high. Renters may increasingly turn to share housing as a means to distribute the growing costs among more people.
The Australian rental market is undergoing significant changes, with soaring rents and tightening conditions posing challenges for households. The combination of increased migration and a shortfall in new home construction is likely to keep the rental market under pressure, affecting affordability and availability for renters.