Rents at historic highs in Q4

Oksana Patron

12 January 2023

 Australians saw the fastest annual increase in rental prices in the last quarter of 2022, with a 14.6% growth for houses and 17.6% growth for units across the combined capitals.

This meant that apart from Darwin and Perth, house and unit rents were record high across the capital cities, according to the Domain Rent Report December 2022.

But at the same time the pace of quarterly growth began to ease compared to earlier in 2022, suggesting the seasonal lift in supply was easing rental conditions marginally or an affordability ceiling had been reached by tenants.

Although there was a seasonal lift in the number of vacant rental properties, tenants still found limited choice due to historic low vacancies for the month of December.

For the first time since September 2020, Sydney was the most expensive city to rent a unit, with unit rents reaching a new high at $575 per week.

At the same time, Sydney’s steepest growth in house rents since 2008 came to an abrupt halt over the December quarter, holding at a record high of $650 per week, and slowed the pace of annual growth for the first time in 18 months but remains high relative to previous years.

Melbourne, on the other hand, saw its longest stretch of rental price growth in 15 years (since 2007-08) for houses and units continued over the December quarter, marking the fifth consecutive quarter of rising rents.

According to the report, house rents hit another record high although Melbourne still remained the most affordable city in which to rent a house. For the first time since March 2020, unit rents are at a new record high at $450 per week following the steepest quarterly and annual growth ever to be seen for the city.

But Perth’s house rents were rising sharply for the fifth successive quarter and accelerated to provide the strongest quarterly outcome in two years. Unit rents also increased over the quarter but the pace of growth has halved compared to the previous quarter.

Also, Darwin’s asking rents grew over the December quarter to reach the highest point since 2015 for houses and late 2014 for units. It was the only capital city to not reach record high house and unit rents in the last year.

Domain’s Chief of Research and Economics, Nicola Powell, warned that the highly competitive rental market seen last year would be amplified as Australia embarked on the busiest period in the rental calendar in January.

“Due to a seasonal lift, those on the hunt for a new lease this quarter will find slightly more choice as the rental market moves into its busy changeover period at the start of the new year freeing up some homes for a short amount of time,” she said.

“Amid Australia’s cost of living crisis, we predict that units will be a popular option for those looking for a rental this year. Unit rents have been growing faster quarterly than houses in most capital cities, likely because affordability concerns continue to persist.

“Units in Bass Hill in Sydney’s South-West have seen a 44.2% annual rise in weekly asking rents. Likewise, units in Melbourne’s CBD have also jumped by 33.3% over the past year. This suggests that budget-conscious tenants are making the shift from houses to units to suit their current budgets while still being close to work, school and amenities.”