With renters facing significant competition for limited stock, courtesy of high immigration and fewer dwellings being built, SQM’s Housing Boom and Bust Report, 2024 is forecasting overall capital city market (asking rents) to jump next year by as much as 10%.
However, if migration doesn’t start cooling down as projected, SQM suspects likely rental increases will be greater than forecasted.
Perth rents jump the most
Perth is expected to record the largest increase in market rents of 12% to 15%, while the country’s capital (Canberra) is expected to record the largest decline of -6% to -2%.
According to SQM data, over the 12 months to 20 November capital city combined market rents soared by 15.2%, while overall national rents, including regional Australia have risen by 9.2%.
Taking a slightly longer view, combined capital city market rents are up 40.5% since January 2020 – which SQM suspects is the fastest rise in rents since the 1970s.
Homelessness and sharing to rise
SQM’s managing director Louis Christopher expects higher rents to trigger a rise in the number of occupiers per dwelling plus a sharp rise in homelessness.
“If we have another year like 2023, we are going to have a very sharp rise in homelessness and the community anger on housing will be immeasurable,” Christopher said.
“In such a situation, I believe it would be a change of Government event.”
Mismatch
SQM attributes the continued rental surge to a mismatch between completed new dwellings for 2023 – expected to be approximately 175,000 dwellings – and an additional population expansion of around 575,000 people.
Based on SQM’s numbers, which include population expansion slowing back to 455,000 people, and dwelling completions falling to 153,000 from an estimate of 175,000 in 2023, there will be a further shortfall of an additional 20,000 dwellings next year.
Investors are exiting
What’s also keeping the overall stock of rental properties low, adds Cameron Kusher, Director of Economic Research is the heightened number of investor-owned properties continuing to be sold.
While there has been a rebound in new investor lending this year, it’s unlikely, adds Kusher to be enough to improve stock levels.
“From here, we expect rents will continue to climb in the major capital cities due to persistent low supply and strong demand which is being exacerbated by the rapid rate of population growth,” said Kusher.
“Although population growth is forecast to slow, it will remain elevated this financial year and next.”
Advertised rent
At the end of the September 2023 quarter, the national median weekly advertised rent on realestate.com.au was recorded at $550 per week, an increase of 3.8% over the quarter and 14.6% over the year.
‘Solutions should encourage better utilisation of current properties and investment in the housing market, or support first-time buyers into homeownership, freeing up the rental stock they currently occupy,” said Kusher.
“It appears unlikely that there will be any imminent relief from the tough rental market conditions in the major capital cities. We expect supply to remain tight and demand to stay persistently strong, which is likely to push rents higher.”
Total rental listings
Based on PropTrack data, the total number of rental listings fell by 7.1% in September 2023 compared to September 2022.
The number of properties available to rent in September 2023 was at a historic low and 22.8% below the September five-year average.
Across the combined capital cities, total listings were 10.9% lower than a year ago and 27.3% below their September five-year average.
In regional areas, total rental listings were 5.1% higher over the year but were 7.5% lower than their September five-year average.
Although total listings were lower over the year nationally, this was largely driven by falls in Melbourne (-20.2%) and Sydney (-12.2%), with Perth (-8.3%) also seeing a comparatively large fall.
The greatest increases in total rental listings over the year were in Hobart (60.2%), regional Tasmania (23.9%) and Canberra (10.1%).
Image: Flatmates.com
