This article is from the Australian Property Journal archive
THE national housing crisis rolls on, although the rental market may have reached a turning point, according to Domain, as some rare positive news for tenants emerged in the form of slowing rental growth, and in some cases, declines.
Domain’s latest Rent Report for the June quarter showed the pace of rental growth was 1.5 times slower than the previous quarter across the combined capitals. It halved in Melbourne and Brisbane and was seven times slower in Adelaide, while growth stalled in Sydney and Perth, and rents declined in Hobart.
The quarter was the weakest June quarter for house rents since 2021 in Sydney (steady at 0.0%) and Melbourne (up 1.8%), and since 2020 in Brisbane (up 1.6%), Adelaide (0.8%) and Perth (0.0%). For units, the pace of quarterly rental growth was halved across the combined capitals, three times slower in Brisbane (1.7%), stalled in Melbourne, Perth and Hobart, and down in Canberra (by 1.8%) and Darwin (by 3.6%).
It was the weakest June quarter for unit rents since 2021 in Sydney, Melbourne and Brisbane, since 2020 in Canberra, and since 2018 in Perth.
When asked by Australian Property Journal if the market had hit a “turning point”, Domain’s chief of research and economics, Nicola Powell said, “Yes, I would say so.”
“Investors are coming back into the market, we’ve got population growth coming off its peak, and we’ve got this affordability ceiling that has been absolutely smashed by tenants.
“Some of the areas that have seen stronger rental growth in the major capital cities such as Sydney and Melbourne are those typically affordable areas. It shows that tenants are saying, ‘I need to find affordability’, and they’re steering towards those more affordable locations.”
But she noted, “we’ve still got some way to go”.
“Australia is still in a housing crisis.
“We’ve got to remember that Australia is in a landlord’s market. And to get it balanced – where that vacancy rate is between 2% and 3% – we need between 33,000 and 66,000 rentals today. That’s still a big shift.
“That’s where I think slight caution needs to be taken.
“We’ve still got to remember we’ve got record rents across pretty much every capital city, apart from Hobart and the unit markets in Canberra and Darwin.
“Tenants are still facing record rents.”
Powell said she “definitely” thinks there is a much better outlook over the next 12 months compared to the last year.
“Vacancy rates are moving in the right direction, rental growth has slowed and stagnated in some cities, so I think in 12 months we’re going to see a better balance between supply and demand,” she said.
“What we have seen over the past couple of years has been quite unusual and those conditions can’t last for the longer-term.
Domain data shows the number of views per listing is declining, and Powell said that the decline is “entrenched”.
“We are seeing a better balance between demand and supply and that is coming out in a reduction of views per listing, but also vacancy rates – we’ve got vacancy rates hitting a six-month high in Sydney (1.2%), Melbourne (1.2%), Brisbane (0.9 %) and Canberra (1.7%), two-year high in Perth (0.6%), two years and eight months-high in Adelaide (0.5%), and a nine-month high in Hobart (1.0%).”
“These are key pieces of information that show that things are changing.”
Table 1: House rents, quarterly and annual changes
| HOUSES | MEDIAN RENTAL ASKING PRICE | ||||||
| Capital City | Jun-24 | Mar-24 | Jun-23 | Quarterly change | Annual change | Status |
| Sydney | $750 | $750 | $700 | 0.0% | 7.1% | Record (steady) |
| Melbourne | $580 | $570 | $520 | 1.8% | 11.5% | Record (new) |
| Brisbane | $630 | $620 | $580 | 1.6% | 8.6% | Record (new) |
| Adelaide | $595 | $590 | $540 | 0.8% | 10.2% | Record (new) |
| Perth | $650 | $650 | $580 | 0.0% | 12.1% | Record (steady) |
| Canberra | $690 | $685 | $675 | 0.7% | 2.2% | Record (last seen in Dec-22) |
| Darwin | $660 | $650 | $650 | 1.5% | 1.5% | Record (new) |
| Hobart | $540 | $550 | $530 | -1.8% | 1.9% | $10 lower than the record price set in March Quarter 2024 |
| Combined Capitals | $650 | $630 | $585 | 3.2% | 11.1% | Record (new) |
Table 2: Unit rents, quarterly and annual changes
| UNITS | MEDIAN RENTAL ASKING PRICE | ||||||
| Capital City | Jun-24 | Mar-24 | Jun-23 | Quarterly change | Annual change | Status |
| Sydney | $720 | $700 | $670 | 2.9% | 7.5% | Record (new) |
| Melbourne | $550 | $550 | $500 | 0.0% | 10.0% | Record (steady) |
| Brisbane | $600 | $590 | $525 | 1.7% | 14.3% | Record (new) |
| Adelaide | $480 | $460 | $430 | 4.3% | 11.6% | Record (new) |
| Perth | $550 | $550 | $480 | 0.0% | 14.6% | Record (steady) |
| Canberra | $560 | $570 | $550 | -1.8% | 1.8% | $10 lower than the record price set in March Quarter 2024 |
| Darwin | $530 | $550 | $520 | -3.6% | 1.9% | $20 lower than the record price set in March Quarter 2024 |
| Hobart | $460 | $460 | $450 | 0.0% | 2.2% | $15 lower than the record price set in March Quarter 2023 |
| Combined Capitals | $630 | $620 | $580 | 1.6% | 8.6% | Record (new) |
Table 3: House and unit combined rental vacancy rates
| HOUSE AND UNIT COMBINED | RENTAL VACANCY RATES | |||||
| Capital City | Jun-24 | Mar-24 | Jun-23 | Quarterly percentage point change | Annual percentage point change |
| Sydney | 1.2% | 0.8% | 1.2% | 0.4 ppt | 0.0 ppt |
| Melbourne | 1.2% | 0.8% | 1.0% | 0.4 ppt | 0.2 ppt |
| Brisbane | 0.9% | 0.7% | 0.8% | 0.2 ppt | 0.1 ppt |
| Perth | 0.6% | 0.3% | 0.4% | 0.3 ppt | 0.2 ppt |
| Adelaide | 0.5% | 0.3% | 0.4% | 0.2 ppt | 0.1 ppt |
| Hobart | 1.0% | 0.8% | 1.3% | 0.2 ppt | -0.3 ppt |
| Canberra | 1.7% | 1.4% | 1.9% | 0.3 ppt | -0.2 ppt |
| Darwin | 0.7% | 1.1% | 0.6% | -0.4 ppt | 0.1 ppt |
| Combined Capitals | 1.0% | 0.7% | 1.0% | 0.3 ppt | 0.0 ppt |
| Combined Regionals | 0.9% | 0.8% | 1.0% | 0.1 ppt | -0.1 ppt |
| National | 1.0% | 0.7% | 1.0% | 0.3 ppt | 0.0 ppt |
Investors unlikely to be swayed by interest rates
Powell is “not convinced” that another interest rate hike from the Reserve Bank will impact a key plank of the rental market rebalancing – the return of investors.
“Rate hikes are obviously going to be painful. Will it be enough to deter investment activity? It will impact borrowing capacity, it will mean the cost of debt will increase for an investor, but I think what investors are sparked by is capital growth. And we’re seeing that in terms of the locations – they’re shying away from Melbourne, which has had really sluggish capital growth for the last 18 months, expect that to continue for the next 12. Overall investors are steering towards those stronger markets, like Perth and Brisbane, which are still expected to show capital growth.
“I think that’s what investors chase – the growth they’re going to see in the asset rather than gross rental yields. An interest rate hike could deter some who are more sensitive to changes, but will one rate hike make the difference to stop investment activity on its trajectory, which has been one of growth? I’m not convinced.”
Powell said further rate rises might lock people in rent market for longer, although a trend being seen is that first home buyers are fast-tracking their purchase because of the “extreme” rental conditions of the past couple of years.
“It becomes a matter of the ‘haves’ and ‘have-nots’ – and that’s accentuated because I think it’s those first home buyers that have the financial support from a family member that are able to lean on borrowing money from a relative that are able to gain access to the housing market, particularly in Sydney. And those that don’t have that support, that don’t have that leverage from a family member, another rate hike or two could dash those dreams of home ownership, in the short-term at least,” she said.
Powell said “it is going to take some time” for the impact of national cabinet’s National Housing Accord – which aims to deliver 1.2 million homes across the country over the next five years – to be seen in the rental market.
“What that’s going to do, if we have more supply and more affordable supply, is that’s going to allow more tenants to become first home buyers and take away some demand pressures from the rental market.
“But supply takes time and the construction sector still has challenges.”
