Fresh insights from suburb-level studies using CoreLogic’s Mapping the Market interactive tool indicate that rental rates for more than 90% of both house and unit markets nationwide have seen a surge over the financial year 2022-23.
Among the markets studied, nearly two-thirds of unit suburbs witnessed a yearly rent hike of 10% or more. A similar trend was observed in over one-third of house markets.
Mapping the Market monitors the yearly change in the CoreLogic hedonic rental value index per suburb, an estimated valuation of rental income derived from listings information and unique property characteristics.
Adelaide, Perth, and Regional Western Australia top the charts in terms of rent value increases. Every suburb in these areas examined revealed an annual rise in rental values for both houses and units. Perth, in particular, has experienced an acceleration in rent hikes since early 2022. Currently, rental values in the city are 13.4% higher compared to last year and 41.8% higher than the period just before the pandemic in March 2020.
CoreLogic’s Economist Kaytlin Ezzy has remarked that a consistent scarcity of rental listings continues to exert upward pressure on rental prices, which have been further negatively affected by higher interest rates.
Ezzy states, “Investors tend to shy away from the housing market during negative economic shocks. The sharp rise in interest rates has coincided with a -23.6% fall in new housing investment lending between April 2022 and May this year, and this includes a slight recovery in investment lending in recent months, which has lifted 10.0% from a low in February this year.”
She further elaborates on the dynamics of demand, “On the demand side, record levels of overseas migrants, many of whom rent in inner-city unit precincts, has bolstered rental demand this year, causing an imbalance between rental demand and supply.”
Ezzy points out the specific scenario in Perth, “For Perth in particular, there is a persistent shortage of rentals, with total rent listings now about -50% lower than the historic five-year average.”
In the year leading up to June, all unit markets in Brisbane, Adelaide, Perth, and Darwin experienced a rise in rent value. However, a handful of markets in Sydney, Melbourne, and Hobart observed a drop in unit rents.
Despite minor downward shifts in Sydney’s Central Coast area, Ezzy noted, “Sydney units continue to record some of the strongest rental growth across the country. Units in Sydney’s Inner-city market of Haymarket recorded the highest annual rise, up 32.6% or $276 per week, followed by Georges Hall (31.3%) and Arncliffe (30.9%) in the city’s Inner South West.”
In contrast, 18 unit markets in Canberra saw a decrease in rent value over the previous fiscal year. Canberra and Hobart were the only capital cities where rental listings exceeded the past five-year average.
Regarding the capital city house markets, Ezzy shared, “Rental growth across capital city house markets was more diverse, with 147 of the 1,686 suburbs analysed recording a decline. This was heavily influenced by Canberra, where weaker population growth, looser rental supply and poor relative affordability saw just two suburbs (Watson 0.8%, Crace 0.1%) record an annual rise in house rents.”
She also warned about the future trends, “While annual rental increases remain fairly geographically widespread, it’s likely we’ll see the pace of rental growth continue to moderate over the coming months, as cumulative rental growth pushes more renters towards their affordability ceiling.”
Moreover, CoreLogic’s Mapping the Market tool has demonstrated an ongoing intensification in the national capital growth recovery trend. A significant 80% of house and unit markets recorded a quarterly increase in home values in the three months to June, contrasting with the 80.7% that experienced a decline between October and December last year. This may assist in easing the rental markets in the following year, as investor confidence in the housing market may be strengthened by more robust capital growth conditions.