According to CBRE’s Apartment Rent and Vacancy Outlook, five Australian markets are likely to record mid to high 30% rental growth between now and 2028.

Due to a further decline in city vacancy rates from the current average of 1.8% to just 0.8%, median rents for two-bedroom apartments across Sydney’s Eastern Suburbs, Parramatta, Melbourne North, Perth City and almost all precincts in Brisbane are expected to grow by $120/week (+26%) over the next five years.

While only four precincts in Australia – Sydney and Perth CBDs, Sydney’s Eastern Suburbs and Sydney’s Lower North Shore – had an average rent of over $600/week for two-bedroom apartments 10 years ago, this has grown to 20 precincts.

By 2028 CBRE’s Pacific head of research Sameer Chopra expects over 70% of Australia’s two-bedroom apartments to have a rent exceeding $600/week.

Australia’s monthly apartment rents are currently 30% cheaper than purchasing at current prices across most precincts. The reversion of interest rates to say 2%-2.5% could see this relative rental affordability remain as capital values rise.

Expensive but cheaper than buying

While vacancy rates need to be around 4%-5% for markets to be in balance, Chopra notes around 75,000 new apartments annually need to be delivered across Australia to keep pace with population growth.

Interestingly, CBRE only expects around 60,000 new stock in 2024 and 2027 – 40% below the previous peak in 2017 and near-decade lows.

But despite the bleak outlook for rents and vacancies, Chopra expects the cost of renting to remain more affordable than purchasing across Australia’s major cities.

“Australia’s monthly apartment rents are currently 30% cheaper than purchasing at current prices across most precincts. The reversion of interest rates to say 2%-2.5% could see this relative rental affordability remain as capital values rise.”

Two-bedroom apartment rents across Australia’s major precincts

​East coast outlook

Based on CBRE’s numbers, the east coast’s three largest capital cities can expect:

Sydney

  • Apartment delivery to average 14,000 annually over 2024-28, under half the 33,000 annual demand for housing stock.
  • Vacancy rate to fall from 2.2% to 0.8% and average rent growth of 6% pa to 2028.​

Melbourne

  • Apartment delivery to average 10,000 annually over 2024-28, nearly 40% below Sydney, a quarter lower than the 38,000 annual demand for housing stock over the next five years.
  • This should continue to drive down city-wide vacancy from 1.7% to 0.9%.​

Brisbane:

  • Apartment delivery to average 6,500 annually over 2024-28, well under half the average 16,500 annual demand for housing stock.
  • This is likely to drive down city-wide vacancy from 1.1% to 0.8%.​