While the pace of rent-price growth has slowed and rental stock has improved over the past year, weekly rents are at record highs and supply is scarce. The tough conditions may be driving renters to look for other options.
According to PropTrack's September quarter rental report, median advertised weekly rents grew by 1.6% during the quarter and 7% in the year. This reflects just half the annual increase in the 12 months to September 2023 and the slowest annual growth since September 2023.
The easing rent-price growth is welcome news for renters who have faced challenging conditions since the pandemic.
New rental listings have also reached their highest level in three years, rising by 8.6% in the past 12 months, which is providing an improvement in choice for those who are looking to rent.
Although the growth in rent prices has slowed and more rental properties are hitting the market, rent prices are at their highest historical level, and total listings are well below their 10 year average.
The strain on renters is still significant.
Some renters may be alleviating pressures by seeking out cheaper properties, moving to more affordable areas or exploring opportunities in the housing market.
When we look at lending activity and a few measures of demand, there seems to be some evidence of this shift.
For lower-priced rentals, the median number of days a property is listed on realestate.com.au is shorter compared with more expensive rentals. This implies that demand and competition for cheaper properties is currently higher from renters.
SA4 regions* that had more affordable rentals 12 months ago have also experienced greater weekly rent growth over the past year, reflecting an increase in demand for areas with cheaper rentals.
Both these trends tended to be more pronounced in capital city areas where rent growth was stronger from mid-2022 to mid-2024.
However, more recently, regional markets have faced tougher conditions.
New rental listings are declining, and rents are rising at a faster rate compared to those in capital cities. These trends may soon become apparent in regional markets as well.
To counteract the high cost of renting and the shortages in rental stock, more Australians may be also considering property ownership. Loan approvals to first home buyers were 9.8% higher in the 12 months to September 2024 compared with a year prior. This could reflect an increase in renters transitioning to the buyers' market.
While the supply of rentals has improved and demand has somewhat declined in our cities, conditions still remain much more challenging than before the pandemic. We expect rent growth to continue slowing in the near term
In regional markets, where the trends are in contrast, we expect rent growth to remain strong.
Though the increase in investors and the exit of renters from the market may bring additional relief in the coming months – for sustained improvement – it is crucial that we build more homes.
*SA4 regions are areas defined by the Australian Bureau of Statistics as regions where people both live and work, and generally have populations between 100,000 and 500,000 people.
