Renters set sights on units as house rents hit record highs

We're currently facing a real rental crisis with historically low vacancy rates and soaring rents. 

Domain’s quarterly Rent Report reveals that house and unit rents have continued to climb across Australia over the last quarter (January - March 2022), putting additional pressure on Australian renters.

Although house rents have hit a new record high, unit rents are growing at a faster rate over the March quarter.

Rising rents, paired with eased restrictions seeing a return to CBD offices and interstate and international movement, have created an increasingly competitive rental market.

 Summary - State of the Nation

• House rents hit a new record high median of $508 per week across Australia’s capital cities, with the country seeing the strongest annual growth in 13 years.
• Meanwhile, median unit rents remain just below the 2018 peak of $464 per week - at $448. That being said, the pace of quarterly growth is picking up, doubling the rate of the prior quarter.
• Unit rents grew faster than houses over the March quarter in Australia as the rate of house rent growth halved while units doubled over the prior quarter.

Commenting on the increased stress renters are finding in the current market, Dr Nicola Powell, Domain’s Chief of Economics and Research, said:

“The tension for renters continued in the March quarter with record high prices across a number of cities.

When combined with Domain’s recent Vacancy Rates revealing that national rates decreased to their lowest on record in March, renters are finding themselves in a heated market with shrinking supply.

For renters facing this more cluttered market, considering whether unit rental options can provide a more affordable alternative to houses, or seeking out cities or suburbs where rental asking prices are showing to be more affordable or have higher vacancy rates, could help in landing a rental property.”

State by State

•  All capitals except Sydney experienced a rise in house rent prices over the quarter, with record-high asking prices being reached in all cities except Perth and Darwin.
• Melbourne remains Australia's most affordable capital city to rent a house, at $450 asking rent per week and recorded the weakest annual growth of all the capital cities.
• Unit rent prices are likewise increasing across the country, with Adelaide having the biggest quarterly jump in price, increasing by 5.6%.
• Investors will find that gross rental yields for houses and units are at the highest point on record for Perth, and the highest yielding capital city for houses.

Sydney rental market

In Sydney, house rents remained steady at their high of $600 a week, after the steepest annual increase in 13 years, at 9.1% annually.

As restrictions ease and international borders open, Sydney’s quarterly unit rent price growth is outpacing houses for the first time since pre-pandemic.

Contributing to this are affordability constraints on house rents and growing demand for units in the city where after a two-year hiatus, employees are returning to CBD offices and looking for centrally located rentals.

Melbourne rental market

Melbourne remains the most affordable capital city to rent houses, recording the weakest annual growth at 3.4%.

The rental market, however, is on the rise, with unit rents making the steepest quarterly increase in 8 years, up 4% over the last year to $390 a week.

This is the first annual increase since the pandemic. In recent months, rental demand has increased, leaving tenants with fewer options, shifting the city into a landlords’ market.

Canberra rental market

Canberra’s house rents increased 3.7% over the quarter to $700, after surging 16.7% over the past year.

Escalating house rents have created a record gap between houses and units, sitting at 30%.

The smaller capital cities

Hobart and Adelaide are in the midst of a rental crisis, as the vacancy rate sits at another multi-year low.

In Adelaide, the overall advertised vacant rentals plunged 69% compared to the prior year. Across the city, unit rents surged by 5.6% over the quarter to a new record high of $380, with Hobart increasing 4.7% to a new record high of $450.

Short-term rentals will be in further demand as tourism resumes across both cities, creating extra tension within the unit rental market.

In Darwin, asking rents are once again on the rise. Unit rents rose for the seventh consecutive quarter, outperforming house rents.

Since the pandemic began two years ago, unit rents have had the steepest increase of all capital cities and house rents second largest, at 31.6% and 27.1% respectively.

Rental yields

Commenting on gross yields from rentals, which are also outlined in Domain’s quarterly Rent Report, Dr Nicola Powell said:

“High rental yields are likely to attract investors to cities such as Perth, Darwin and Canberra, with investors able to tap into competitive rental trends and use them to their advantage.

In the current state of the rental market there are opportunities, it is worthwhile considering whether you are buying in metro or regional Australia, and the subsequent property type that maximises opportunities for return.

For instance, the unit gross rental yields for combined capital cities increased by 2.3% over the past quarter, however, decreased by 1.4% for houses.”

For the full Domain Rent Report including a breakdown of the findings across Australian capital cities visit: Domain.com.au .