CoreLogic, Australia’s leading provider of property information and analytics, have released their quarterly Rental Review which shows that across our capital cities and, regional areas – houses and units all saw an increase in rents last quarter, culminating in the highest calendar year growth rate since 2007, with a national rental index increase of 1.9%.
Despite quarterly growth rates easing since peaking in March at 3.2%, the national index recorded its highest annual growth rate since January 2007 in November at 9.44%, before falling slightly in the 12 months to December at 9.40%.
The increases are attributed to strong demand, particularly for detached housing, in relation to rental supply.
CoreLogic’s Research Director Tim Lawless said “for more than 18 months we’ve seen demand for detached housing continue unabated as more renters work from home, either on a permanent or now hybrid working arrangement, which drives demand for more spacious living conditions.”
“In addition to this trend, investors, while still active in the market, have been dwarfed by an over representation of owner occupiers entering the market, upgrading or buying holiday homes that aren’t being added to the rental pool. This is also being played out in the rapid growth in regional rental markets.”
Regional rents continued to outpace capital city rents over the fourth quarter with regional dwellings rising 2.5% against the 1.6% rise in capital city rents, taking the annual regional rental growth rate to 12.1%. Over a 10-year period regional house rents have increased 33.2% compared to 24.9% growth across the combined capitals. The regional unit market has seen rents increase 41.4% in the past decade compared to capital city figures of 14.4%.
Mr Lawless said the stronger rental conditions across the regional markets is a story involving both demand as well as supply, following a surge in regional population growth through the pandemic, especially across regional Victoria, regional NSW, and regional QLD.
“While demand has risen, we generally haven’t seen much of a supply response. Australia’s rental market is mostly reliant on private sector investors to provide rental housing,” he says.
“Investors as a proportion of total mortgage demand moved through record lows in early 2021, highlighting relatively low levels of investment activity across the country and also implying relatively low levels of new rental stock coming onto the market.
“Arguably the regions have less elasticity in rental markets, meaning, when demand rises, supply is less responsive than capital cities where investors are generally more active.”