Australian Rental Market Shows Signs of Stabilizing After Years of Soaring Prices

After years of escalating rental prices, the Australian rental market is showing signs of stabilizing, offering a glimmer of hope to renters nationwide. This comes as recent figures from CoreLogic indicate a mere 0.1 percent increase in national rent growth over the past 12 months, marking the smallest rise since the pandemic began in 2020.

Hannah Murphy, in her detailed analysis, points out that this is the first positive sign for Australian renters since 2020, when rental prices started their sharp ascent. According to Tom Lawless, CoreLogic’s executive research director, “Although the pace of growth is slowing, it’s doing so from an extremely high base,” highlighting a significant shift from the rapid increases seen in previous years.

The slowdown in rental price increases is attributed to several factors, including a decrease in overseas migration and a growing trend towards share housing. “With such pronounced rental affordability pressures, it’s likely more rental households are looking to maximize their tenancies to spread rental costs across a larger number of tenants,” Lawless explained.

Michael Fotheringham from the Australian Housing and Urban Research Institute also noted the changing dynamics, stating, “It generally shows a slowing in the growth of rental prices, and that’s not to say that there’s no growth, nor is it saying that the rental prices are going down. They’re just going up less quickly.”

This sentiment is echoed by RBA officials, who acknowledged the challenges facing the rental market. RBA governor Michele Bullock and her colleagues, during a recent economics committee meeting in Canberra, conveyed their awareness of the ongoing pressures on rents due to the housing shortage. “It’s really, really challenging, and it’s unfortunately because [housing] supply takes time to come online. You can’t build new homes overnight,” said the RBA’s assistant governor of economics, Sarah Hunter.

Experts believe the increase in supply has played a crucial role in easing rental prices. Peter Koulizos from the University of Adelaide’s Australian Centre for Housing Research remarked, “Rental growth is slowing for one main reason — supply. The supply of new rental property has increased, as builders and developers start getting back to normal after the restrictions due to COVID.”

While the overall outlook appears promising, challenges remain, particularly in regional areas where rental growth continues to outpace that in major cities. “This is a growing problem for our regional communities now — this is not just a big city problem,” Dr. Fotheringham warned, highlighting the disparity between city and regional rental markets.

As Australia’s rental market begins to find its footing, the hope is that these initial signs of stabilization will lead to a more sustainable environment for renters across the nation.

References:

https://www.abc.net.au/news/2024-08-17/rental-growth-is-slowing-analysts-say/104217432