House rents fell in Canberra over the June quarter, bucking the national trend of continuous rental price rises in most major capital cities, a new report finds.
According to Domain’s Rent Report for the June quarter released today, Australia is experiencing a multi-speed rental market but remains a landlord’s market, as limited supply pushes asking rents to further historic highs.
Overall, the capital cities are experiencing their longest stretch of continuous rental price growth on record. However, vacancy rates incrementally increased from record lows to 1 per cent, providing a glimmer of hope that the pressure on rental supply is easing.
In Canberra, house rents made the steepest quarterly decline and first annual decline the city has seen since 2014. This bucks the overall national trend, with Canberra one of only two cities to experience falling house rents, along with Hobart.
Unit rents are also at a record high across the combined capitals and all cities, apart from Canberra, Hobart and Darwin.
For the first time since 2018, Sydney is now Australia’s most expensive city to rent a house and unit.
Melbourne remains the most affordable city to rent a house, despite house and unit rents rising for the seventh consecutive quarter, marking the longest stretch of rising rents the city has ever seen.
“The colliding mismatch of heightened demand and supply side constraints has continued to place pressure on house and unit asking rents across Australia,” said Domain’s Chief of Research and Economics, Dr Nicola Powell.
“The acceleration of unit rents across the combined capitals, and particularly in Sydney, Brisbane and Perth, has seen the price gap between property types narrowing.
“Adelaide, Darwin and Hobart are currently the only cities where house rents outpace the quarterly growth of unit rents,” she said.
“This narrowing in the price gap reflects the heat in the rental market right now – with affordability constraints driving greater demand to units, and overseas migration bolstering demand in inner city locations often dominated by units” Powell added.
Barriers to home ownership
Key factors contributing to a tight rental market include the quicker-than-expected return of international students, the revival of overseas migration, as well as tenants opting to rent for longer due to financial barriers to home ownership.
With net overseas migration estimated to be at a record high over the previous and current financial year, Domain estimates roughly 127,000 additional dwellings will be needed this financial year alone.
Further exacerbating this is the unprecedented headwinds faced by the construction industry, which have prompted a slowdown in new builds – and subsequently, new supply.
“With a number of factors at play, there needs to be a seismic shift in supply to address the challenges being faced. In fact, our research shows that more than double the rental listings needed today to create a balanced rental market,” said Dr Powell.
“There is no one-size-fits all solution to these challenges. Rising investor activity is needed, the build-to-rent sector advanced, additional rental assistance provided for low-income households, more social housing and assisting tenants’ transition to homeowners.”
