The rental market continues to show signs of easing with vacancy rates increasing from record lows, signalling a potential shift in the housing crisis.
According to CoreLogic, national vacancy rates have increased to 1.8 per cent, up 40 basis points from the low of 1.4 per cent recorded last year, though still remaining 1.5 percentage points below pre-COVID averages.
CoreLogic Economist Kaytlin Ezzy said that rental growth has significantly slowed from its peak.
“Rental growth has eased significantly from the height of the rental crisis. At the national level, annual rental growth peaked at 9.6 per cent two years ago and has since eased to 5.8 per cent,” Ms Ezzy said.
Several factors have contributed to this slowdown, including changes in migration patterns and household formation.
“On the demand side, we have moved past the peak in net overseas migration in the March quarter of last year, which typically feeds directly into additional rental demand,” she said.
The trend of smaller households during COVID has also reversed, with more renters now forming larger households to manage costs.
Investor activity has also played a role in easing rental pressure, with financing up 29.5 per cent over the year to September.
“In September, investors made up 38.3 per cent of all new financing, well above the 33.8 per cent decade-average, suggesting this uptick has likely helped alleviate some supply-side measures by delivering additional rental stock,” Ms Ezzy said.
Looking across the capitals, vacancy rate rises were recorded across all cities, except for Hobart compared to this time last year.
“Rates in both Brisbane (2.1 per cent) and Adelaide (1.1 per cent) have risen by 60 basis points over the year, while Melbourne (1.5 per cent), Sydney (2.2 per cent), Perth (1.2 per cent) and Canberra (2.4 per cent) are all up compared to 12 months ago,|” she said.
Perth continues to be the one city that is facing significant rental pressure despite recent improvements.
“Perth’s current vacancy rate of 1.2 per cent remains -4.6 percentage points below the pre-covid average of 5.8 per cent, suggesting ongoing rental shortages across the city,” Ms Ezzy said.
“This aligns with Perth recording some of the strongest rent increases across the country, with rental values up 9.6 per cent over the past year.”
Ms Ezzy said the outlook is now a lot more positive for tenants.
“Looking forward, we’ll likely see vacancy rates continue to lift as affordability pressures put further downward pressure on rental growth,” she said.
