Market Update - December Qtr, 2023
According to CoreLogic, in December, the national median rent reached a new record high – $601 / week. This number is based on advertised rent rates and represents the first time on record the national median has cracked $600 / week. It also represents a substantial increase from the $437 / week national median recorded in August 2020, before the recent upward trend in prices began.
The good news here is that, while rents continue to rise, the rate of increase is slowing. The 8.3% increase recorded over 2023 is down on the average annual increase of 9.1% recorded over the last 3 years. And this slowing can be seen across all major market segments – capitals, regionals, houses, and units.
It is worth noting here that there was a slight “re-acceleration” in the rent growth rate over the 3 months to December. However, this was largely driven by capital city house rents and some key regional areas. And signs suggest that this is most likely a temporary re-adjustment, not an ongoing trend – but more on that below.
Availability remains the primary cause of continued rent increases, despite vacancy rates rising slightly over the last 3 months of the year. New listing levels remain well below the long-term average and demand for properties remains extremely strong. Thankfully, most experts believe that we will start seeing an easing in these conditions over the next 12 months.
Our predictions for 2024
Growth in rents will continue to slow: With most of the conditions driving recent increases now softening, median rents should also start to stabilise. We’re already seeing this in some locations, with rents actually decreasing in both Canberra and Hobart over 2023. That said, while more locations will likely see rents stagnate, it looks like some locations will continue to see strong growth, which could keep the national median rent reasonably stable.
Demand for houses will increase – at least comparatively: As noted above, the “re-acceleration” of growth in rents in December was mostly driven by capital city house markets. This is a reversal of a recent trend which saw apartments in significantly higher demand than houses. But, with affordability now a major concern, renters are increasingly looking to share houses, and outer suburban and regional areas (where houses are more common), to keep costs down.
Availability will start to increase: Over the last 18 months, investors have been hit with an unprecedented succession of interest rate hikes. This had a significant impact on rental availability as many landlords chose to sell their properties as they couldn’t – or didn’t want to – absorb the additional cost. However, with lending conditions stabilising and a potential reduction in the cash rate only months away, investor activity is increasing, which should mean more properties will soon be available.