Australian rental prices grow at their fastest pace in seven years as investors exit market

Surging demand and a shortage of properties sees rents grow at their fastest rate in seven years, as experts warn a push by business to increase immigration will only make it worse.

The ongoing rental crisis is likely to worsen before it gets better. (AAP Image / Angelo Velardo)

The country’s residential rental crisis will get worse before it gets better as an exodus of investors and surging demand sees rental prices grow at their fastest pace in seven years.

Experts warn the rental market, which has seen supply drop 40 per cent below the decade average in some cities, will further deteriorate under a push by business to significantly increase immigration to address a worker shortage.

It comes as new PropTrack data showed the median rental price increased 7 per cent over the June quarter from a year ago — the fastest pace of growth over the past seven years. Combined capital city house rents are now $500 per week and $450 for units, while house rents in regional areas are $455 and $395 for apartments.

PropTrack chief economist Cameron Kusher said a push by business groups and employers to ramp up immigration to fill nearly 500,000 vacant jobs amid historic low unemployment would worsen the country’s rental crisis.

“We are only at the start of the rental crisis, and with overseas and interstate migration returning with borders now open, it seems likely that rental conditions will tighten further over the coming months,” Mr Kusher said.

“If the push by business leaders come to fruition, stock levels which are already tight, will further decrease and rents will grow rapidly — this is likely to be evident in Sydney and Melbourne.”

The surge in rental prices comes amid ongoing low stock levels with the total supply of rental properties down 18.2 per cent from a year ago, bringing volume 27.7 per cent lower than the decade average.

The largest year-on-year declines in rental listings were recorded in Melbourne (-25.7 per cent) and Brisbane (24 per cent), while the largest increases were recorded in Canberra (20.9 per cent) and Darwin (8.7 per cent).

Competition for rental properties is seeing days on market fall in most cities. Picture: NCA NewsWire / Jeremy Piper

A heightened number of potential renters continue to battle for a reduced supply of stock available for rent. While more investors will alleviate the imbalance between demand and supply over time, Mr Kusher said it seemed likely that the volume of stock would remain insufficient over the near-term, creating more upwards pressure on rental prices.

Rental supply has been depleted by a combination of factors including the recent property boom, which saw many investors cash in on high prices. Mr Kusher said other landlords had used their properties as second houses or leased them out as short term accommodation.

“It seems strange that with no one coming into the country and population growth low that we would see the rental market this tight, but investor activity is significantly below the decade average,” he said.

“More rental properties are needed, and while investor lending activity is increasing, there is a long way before it has an impact on supply.”

Mr Kusher said decreasing the barriers for first homebuyers and available incentives could offset some of the pain, there was no quick and easy solution.

“This is likely to mostly be offset by the return of arrivals from overseas, most of whom seek rental accommodation on arrival,” he said.

Strong demand for rental properties and the ongoing limited supply has seen significant increases in advertised rents. The rental increases over the year have been particularly strong in regional markets. However, regional markets were showing signs of cooling down as tenants to return to the major cities or look to buy in those towns.

More recently, there have been big increases have been apparent across parts of the major capital cities. Despite this, rents in most inner- and middle-ring areas of Sydney and Melbourne remain lower than they were pre-Covid.

Originally published as Australian rental prices grow at their fastest pace in seven years as investors exit market