In pictures: How is rent tracking

While capital city rents continue to rise at a solid clip, there has been a slight easing in growth in regional Australian rents, with some regions showing declines.

Growth in Australian rent values has gone from low, stable rates through much of the 2010s, to unprecedented levels in the past year. The CoreLogic hedonic rental value index had an annual average growth rate of 2.1 per cent nationally in the decade to January 2020, but in December 2022, annual growth hit a high of 10.2 per cent. It has shown a marginal easing to 10.1 per cent in the 12 months to March.

Rolling annual growth in Australian rent values

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The portion of income required to service rent nationally hit a low in September 2020 at 26.5 per cent and was especially low across the combined capital cities at 25.0 per cent.

The pandemic caused a stark drop in rental demand amid international border closures and initial job losses which led to some young adults moving back in with their parents.

Rents started to rise in late 2020 and by April 2023 the portion of income required to service new rents nationally had lifted to 30.8 per cent, the highest level since June 2014.

Rental affordability has deteriorated more rapidly across the combined regional market of Australia, with rents as a share of income rising from a low of 28.5 per cent in June 2020, to 33.1 per cent in March 2023.

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While rental affordability has deteriorated for median and high-income households, the median income household in most markets would still be able to live comfortably spending just over 30 per cent of income on rent.

Affordability for low-income households

Affordability for low-income households has, however, become particularly stretched.

Rental costs for those on the 25th percentile income have risen to 51.6 per cent of income, which suggests extreme housing stress using the ‘30/40’ rule as an indicator. 

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The rental crisis stems from both strongly rising demand and falling supply.

The reduction in rental supply has been driven by both higher inflation and higher interest rates. High inflation has contributed to bottlenecks in the construction sector and higher interest rates have reduced demand for new investment property.

Weekly rents have risen an estimated $115 per week through to April while mortgage payments are estimated to have increased by $318.

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The demand side was also having a significant impact with both stronger domestic demand for homes as the number of people per household fell, as well as the return of overseas migration. ABS data shows around 85 per cent of new arrivals rent.

Felicity Emmett is a Senior Economist at ANZ and Eliza Owen is Head of Residential Research Australia at CoreLogic.