Analysis on Australia’s rental markets

Around 31 per cent or nearly 3 million households in Australia are renters, with 26 per cent of households renting from private landlords and 3 per cent of households renting from state or territory housing authorities. Changes in the rental market are important because they typically accommodate lower income earners who are more vulnerable to experiencing housing stress. The COVID-19 pandemic period has had a substantial impact on Australia’s rental markets, with vacancy rates now at low levels in most cities and regions. There has also been an unusually high degree of variance in rental markets due to specific local demand and supply drivers.

This paper provides a comprehensive snapshot of Australia’s rental markets. It covers social housing rentals and how they relate to private rentals in capital city and regional areas, including the distribution of rental changes. It also looks at gross rental yields for all major cities and states, and catalogues the top 10 Local Government Areas (LGAs) in major city and regional areas with the highest and lowest rental growth and highest and lowest vacancy rates.

Key insights from the research report include:

  • Vacancy rates are at exceptionally low levels in most markets. The Sydney and Melbourne markets were most affected by border closures during the pandemic but have recovered strongly. However, vacancy rate pressures are less acute in these markets, particularly Melbourne.
  • Advertised rents are increasing strongly in Sydney, Melbourne and Adelaide, with rents in these cities rising by at least 10 per cent (and up to 15 per cent in Adelaide) over the year to October, however the rent paid in existing rental agreements across the entire dwelling stock is rising more modestly. In the short to medium-term, the pressure on advertised rents will spill over into existing rental agreements as they come up for renewal.
  • After surging rent growth during the pandemic, annual rent growth in all regional areas has peaked and is now slowing. This suggests some of the internal migration patterns and behaviours observed during COVID-19 might be unwinding. For example, annual rental growth in regional Victoria while still strong has halved to 6 per cent from 12 per cent in 2021, while in regional NSW it has slowed from 12 per cent to 7 per cent.
  • Advertised rents have also peaked and are slowing in Brisbane, Perth, Hobart, ACT and Darwin. As an example, rental growth in Perth in the second half of 2021 peaked at 18 per cent but has since eased to around 12 per cent.
  • During the pandemic and into 2022, in Sydney and Melbourne, the lowest vacancy rates (and strongest rent increases) were typically observed in the outer areas, with inner city areas recording higher vacancy rates (and lower rental pressures). More recently inner-city areas are experiencing stronger rental growth as population growth picks up.  
  • The strongest rental growth has been at the top-end of the market, including luxury apartments and detached homes. There is also upward pressure at the bottom-end of the market. NSW, Victoria and Queensland are seeing rent at the middle and lower ends of the private market increase more rapidly than the rent paid in social housing, making it more difficult for social housing tenants to transition into the private market.