Rental prices across Australia barely shifted in the three months to September and are expected to stagnate even more, two new reports show.
Tenants may be relieved that Australia’s sharpest period of growth on record appears to be over in most cities, while rents in Brisbane and Canberra are now falling on average.
Domain chief economist Nicola Powell told SBS News prices inevitably had to stop growing after the unprecedented rises of the past five years.
“I think the extreme rate of rental growth is one of the aspects that’s actually slowing down the rent growth that we are seeing now,” she said.
“The rental market has reach not only reached its affordability ceiling, it’s actually smashed it and surpassed it.”
Domain data shows house rents have gone up by 48 per cent since March 2020 and unit rents across the combined capitals have increased 40 per cent since 2020.
Wages only increased 13 per cent in that time, Powell said.
Domain’s latest rental report showed house rents when measured across all capitals combined and all regional markets combined did not move at all in the last quarter.
House rents in Sydney rose 2 per cent to a record high of $775 per week, while in Darwin they rose 3 per cent to $680, in Hobart they rose 1.9 per cent to $550, in Perth they rose 1.5 per cent to $660, Adelaide they rose 0.8 per cent to $600.
House rents in Brisbane fell 0.8 per cent to $625 and in Canberra they fell 0.7 per cent to $680 per week.
House rents in Melbourne stayed stable at $580 per week.
Nationally, house prices rose 7 per cent over the past 12 months, which was the slowest year-on-year growth in three years.
Unit rents did not grow at all when measured as combined capitals and in Sydney and Melbourne remained stable at record highs of $720 and $550 respectively.
Powell said rents will continue to slow because tenants simply can’t afford the high prices.
“What that means for the rental market is it’s playing out in driving demographic shifts. It’s prompting tenants to seek house shares or opt for inter-generational living. They’re moving back in with mum and dad to alleviate the financial strain.”
A separate report released by PropTrack shows annual growth in unit rents, at 9.1 per cent, remained stronger than annual growth in house rents, at 6.9 per cent, with the gap narrowing to just $20 per week.
PropTrack director of economic research Cameron Kusher said more properties have ben made available for renters.
“More investors are coming into the market as well and lending to investors over the past year is up 30 per cent.
“So if you’re getting more investors, you’re going to be getting more rental stock, which lowers the acute demand”.
Will houses become cheaper to buy?
CoreLogic data showed preliminary auction clearance rate fell sharply last week to 64.5 per cent, which some analysts have interpreted as a sign house prices could fall, as sellers are forced to lower prices in order to find buyers.
Australia’s record rental price growth appears to be slowing, new reports show. Source: AAP / Mick Tsikas
Powell said the homes-for sale-market has had a flow of new listings coming onto the market which has created a buildup of supply.
“Choice is rising for buyers and what that higher choice is doing is actually slowing down the pace of price growth. This spring for buyers is going to be one of the better springs that we’ve seen in a number of years because of higher choice”, she said.
Powell said many buyers may be waiting for the Reserve Bank of Australia to which three of Australia’s major banks predict will happen next year.
Kusher said home price growth has been slow all year and prices could start to go backwards in more areas.
“At the moment buyers, if they miss out on a property, feel like something else is going to come up in the not-too-distant future,” he said.
“Whereas a couple of years ago, there was not much for sale, there was not much coming to the market and there was this desperation and fear of missing out from people looking to buy that’s just not as prevalent anymore.”
