The Australian rental market continues to put pressure on tenants, with rents reaching record highs in all capital cities. While price growth has slowed, low vacancy rates and limited new housing supply mean landlords still hold the upper hand.
A Slowdown, But Not a Reversal
According to Domain’s latest March-quarter rent report, rental price growth is the slowest it has been in four years. House rents rose by 3.2% annually, while unit rents increased at a slightly higher rate. Despite this deceleration, rents remain at historical highs, leaving many tenants struggling to find affordable housing.
Domain’s chief of research and economics, Dr. Nicola Powell, notes that a slight increase in supply is helping to rebalance the market. However, she warns that it is still far from meeting demand, keeping competition high and affordability a challenge.
Why Are Rents Still So High?
Several factors are at play:
Low vacancy rates: Less than 2% of rental properties are available in all capital cities.
Affordability limits: Many renters are reaching their financial breaking point, limiting further rent increases.
Changing tenant behavior: More people are opting for share-house arrangements or staying in family homes longer.
Limited new supply: While building completions have slightly increased, they’re still insufficient to meet demand.
Declining construction approvals: In February, new dwelling approvals fell by 0.3%, indicating that a significant increase in supply isn’t coming soon.
The Outlook for Renters and Landlords
The current data suggests that Australia remains very much a landlord’s market. While the pace of rent hikes has slowed, the fundamental supply-demand imbalance means relief for renters may still be a long way off.
For landlords, this means continued strong demand, but they may need to be mindful of tenants’ financial constraints when considering rent increases. For renters, it highlights the importance of planning ahead and exploring all available options in a tight market.
As the property landscape continues to evolve, one thing is clear—Australia’s rental market remains highly competitive, and without a substantial boost in housing supply, the power will remain largely in the hands of landlords.
