Annual rental price growth across Australia last month dropped below 10% for the first time in two years despite the ongoing dearth of places available to rent.
According to the latest PropTrack rental market data for March, advertised Aussie rents increased by 9.1% over the year to March 2024.
It’s not a whole heap to celebrate for Australia’s beleaguered renters – 9.1% still adds up to an extra $50 per week.
But at least it is down from the highest annual growth of 19.6% in March last year.
PropTrack’s director of Economic Research, Cameron Kusher, says continued strong demand saw new and total rental listings on realestate.com.au drop by 13.7% and 11.3% year-on-year, respectively, to be at their lowest levels in more than 14 years – or since March 2010.
The national rental market has remained challenging for renters over the first quarter of 2024, Cameron says.
“Over recent years, the market has regularly been characterised by persistent strong demand and low supply which is affording landlords the ability to increase rents. We expect these conditions to persist in 2024.”
Over the first quarter of this year, median advertised rents across Australia increased by 3.4% to reach $600 per week.
While this quarterly increase was unquestionably strong, Kusher adds it was a much slower rate of growth compared to the 5.8% rise over the corresponding quarter last year.
With rental growth outpacing home price growth across the country over the past year, gross rental yields have increased. In March 2024, gross rental yields reached 4.4%, up from 4% in March 2023, achieving the highest gross rental yields since August 2020.
Each capital city and most regional markets across the country have recorded an increase in gross rental yields over the past year.
PropTrack adds that across the combined capital cities, gross rental yields were recorded at 4.3% in March 2024, increasing from 3.9% a year prior.
Combined regional market gross rental yields were at 4.5% in March 2023 and rose to 4.6% by March 2024.
Aussie rental market snapshot March 2024
In the year to March 2024, national advertised rents increased by 9.1% or by $50 per
week – the first time in two years that price growth was below 10%.
New rental listings were 13.7% lower in March 2024 compared to a year prior and were the lowest they’ve been for the month of March since 2010.
Total rental listings were down 11.3% from March 2023, with the fewest total rental listings for the month of March since 2010.
Properties were leased quickly in the March 2024 quarter, with the median rental listing duration on realestate.com.au holding steady at 18 days, unchanged from 2023 but below the March five year average of 23 days.
In March 2024, the national rental vacancy rate dropped to 1.1% from 1.2% in the previous quarter, and 1.3% in March 2023. Prior to the pandemic the national rental vacancy rate was typically around 2.5%.
Gross rental yields for houses grew from 3.6% to 3.9% year-on-year to reach their highest level since September 2021, while unit rental yields increased from 4.4% to 4.9% to reach their highest since February 2015.
Rapid rental price growth has pushed more people towards home ownership, with the value of lending to owner-occupier first home buyers increasing by 20.7% over the year to February 2024, its largest annual rise since July 2021.
With rents increasing alongside the cost of living, the message is don’t start holding your breath for succour.
Cameron says as the squeeze continues, fewer people will be able to afford these higher prices and will look for cheaper alternatives including smaller properties or share house living, while others may expedite buying a home instead.
“A mismatch between demand and supply of rental stock clearly remains and is unlikely to be rectified any time soon. While we are seeing more lending activity to investors and first home buyers, population growth remains heightened as does investor selling, and housing construction remains at extremely low levels.
“The scarcity of new rental listings reflects the challenge that renters are facing, with a significant shortage of properties becoming available for rent and more people renting.
“As was the case in 2023, we expect that the rate of rental growth will continue to slow in 2024.”
A difficult year
Annual rental growth has remained much stronger in capital cities than regional markets, and growth is relatively stronger in the major capital cities than it is in the smaller ones.
Rents are increasing rapidly, Cameron says, encouraging more Aussies to become first home buyers, however he warns only a certain cohort of renters can make this transition.
“Australia’s population is growing at a rapid pace, creating more competition for rental stock and exacerbating shortages.
“Over the 12 months to September 2023, the national population increased by a record 659,795 people. Of this increase, 548,770 were from net overseas migration of which most are unlikely to own their own property and therefore rely on rental accommodation.”
Over the year to February 2024, the value of lending to owner-occupier first home buyers increased by 20.7%, which is as much as it sounds – the largest annual rise since July 2021.
Bonus house-shaped bullet points
In March 2024, houses maintained a lower vacancy rate (0.9%) compared to units (1.6%).
House vacancies decreased from 1% in December and March 2023, while unit vacancies dropped from 1.9% in December 2023 and 1.8% in March 2023.
Total rental listings in the combined capital cities dropped by 10.7% year-on-year to March 2024, now 34.2% below the decade average up to March 2022.
Regional markets experienced a steeper annual decline of 12.7%, with total listings 38.5% lower than the decade average.
Rental listings nationally received an average of 28.9 enquiries in the March 2024 quarter, up from 24 enquiries in previous quarter but down 1.8% from the year prior.
Gross rental yields for units in Melbourne (5%) and Darwin (7.2%) are at their highest of any time over the past decade.
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