Rental growth drops below 10% for the first time in 2 years
Even with demand for properties high, it appears that forecasts of slowing rental growth are proving true.
PropTrack’s Rental Report for the first quarter of 2024 has shown that while rents are still on the rise, the so-called “affordability ceiling” has started to come into play.
According to the firm, in the year to March 2024, national advertised rents increased by 9.1 per cent, equating to $50 per week. While still substantial, this is the first time in two years that price growth was below 10 per cent.
The marginal slowdown can’t be attributed to a lessening of competition, however, as vacancy rates are still extremely tight.
In March 2024, the national rental vacancy rate dropped to 1.1 per cent from 1.2 per cent in the previous quarter, and 1.3 per cent in March 2023. Prior to the pandemic, the national rental vacancy rate typically hovered around 2.5 per cent.
This is borne out in PropTrack’s listings data, which revealed that new rental listings were 13.7 per cent lower in March 2024 compared to a year prior and were the lowest they’ve been for the month of March since 2010.
Total rental listings were also shown to have dropped 11.3 per cent from March 2023, with the fewest total rental listings for the month of March since 2010.
Moreover, properties were leased quickly in the March 2024 quarter, with the median rental listing duration on realestate.com.au holding steady at 18 days, unchanged from 2023 but below the March five-year average of 23 days.
PropTrack’s director of economic research, Cameron Kusher, explained that the deceleration in the speed of rental price growth can largely be attributed to consumer behaviours changing in the face of financial pressures.
“With rents increasing alongside the cost of living, fewer people will be able to afford these higher prices and will look for cheaper alternatives including smaller properties or share house living, while others may expedite buying a home instead,” he said.
This latter point has proven to be true, with the value of lending to owner-occupier first home buyers increasing by 20.7 per cent over the year to February 2024 – its largest annual rise since July 2021.
Kusher also commented that while the nation is seeing investor lending activity rising, “a mismatch between demand and supply of rental stock clearly remains and is unlikely to be rectified any time soon … population growth remains heightened as does investor selling, and housing construction remains at extremely low levels”.
Kusher said that while he expects to see the rate of rental growth continue to slow over the course of the year, that does not mean that relief for the nation’s tenants is in sight. Instead, vacancy rates and listings data provide a more accurate picture of whether renting issues are easing.
“The scarcity of new rental listings reflects the challenge that renters are facing, with a significant shortage of properties becoming available for rent and more people renting,” he said.
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