Rents have risen at the fastest rate for 14 years as Australia’s landlords seek to recoup costs in the face of rising interest rates and higher inflation.
According research firm CoreLogic’s quarterly rental review, the national rental index increased 0.9% in the month to June and 2.9% over the June quarter.
Rents are 9.1% higher across capital cities and are up 10.8% in regional areas compared with June 2021. Canberra remains the country’s most expensive rental market, with the typical home renting for $690 per week, ahead of Sydney which recorded a median rental value of $643 per week, and Darwin at $565 per week.
The increase comes as the Reserve Bank raised interest rates for third time in as many months in an attempt to keep a lid on inflation which is predicted to rise to 7% this year.
Nicola Powell, chief of research and economics at Domain Australia, said that rising rates may impact rental affordability as landlords attempt to reimburse their increased costs.
“If an investor has higher levels of costs associated with their investment property, if they’re able to pass that cost on through higher rents they will do that,” she said.
However, Powell said it was only one of several other factors driving up rents, particularly vacancy rates as demand for rental properties rose.
Data from Domain showed widespread drops in vacancy rates since the start of year, with the national average plunging to 1%.
“Generally, when vacancy rates go below 2%, it’s a landlord’s market, at around 3% it’s balanced and above 3% it favours tenants. What we’ve got right now is a landlord’s market across every single capital city in Australia,” she said.
Greater “household formation” was one cause, Powell said, a phenomenon which saw people move out of home as rental costs in major cities like Melbourne dropped during the pandemic lockdown period.
She said that the lasting effects of this pattern, coupled with the return of international migrants and longer-lasting tenancies, as high prices lock people out of the property market, have compounded the effect.
“A house is a basic need for shelter, people deserve a roof over their heads. And it is challenging for lower income earners.”
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