Rental growth slowed to 2% across Australia in the recent December quarter, however the country still saw rents increase at a record 10.2% nationally in 2022.
CoreLogic found the December 2022 quarter was down from 2.3% growth in the September quarter, and a peak quarterly growth rate of 3% in the three months to May.
CoreLogic Head of Research Eliza Owen said December marked the second consecutive quarter that the pace of growth slowed, and coincided with a small lift in the rental vacancy rate to 1.17% in December.
“The decline in quarterly rental growth rates observed in the December quarter was led by the capital cities where rents continued to increase but at a slightly slower rate than they have done in September and June quarters,” she said.
“While a slowdown in the pace of rent rises could be a sign that the rental market is starting to shift, it’s not great news for tenants just yet. Rents are still rising in most capital cities and regional areas with vacancy rates low.”
Source: CoreLogic
Australian rent values have lifted 22.2% since the start of the upswing in September 2020, marking the largest rental upswing on record.
During this 27-month period, the median weekly rent valuation across Australian dwellings rose from $430 per week to $519.
The small lift in the rental vacancy rate to 1.17% in December, up from a low of 1.05% in November and slowing rate of growth could be due to several factors, Owen said.
“It is not entirely clear whether the rental market will continue inching toward a turning point, or if this is a temporary, seasonal reprieve due to higher new listings through December,” she said.
“New advertised rent listings saw a seasonal peak in the four weeks to December 11th. Through this period, 50,867 new advertised rental listings were counted by CoreLogic, which is the highest volume observed since mid-February, another seasonal high point.
“However, it’s important to recognise despite the increase in rental listings, the figures remain -13.8% lower than the previous five-year average for this time of year.”
Source: CoreLogic
With another seasonal uplift in advertised rents expected in the next few weeks, rental growth could ease further.
Owen said the rental market outlook was mixed for 2023, with an increase in demand from international visitors during a time of weak confidence among property investors.
“On the one hand, returning overseas migration is likely to place continued demand on rental markets popular with overseas arrivals,” she said.
“Historic migration data suggests this would be Inner Melbourne, the South East of Melbourne, the West suburbs of Melbourne and Sydney’s Inner South West.
“On the flip side investor activity, and therefore rental supply, is not expected to pick up substantially in the year ahead. Even though rent yields are rising, investors are facing higher interest costs, and reduced capital growth prospects.”
A seasonal uplift in new advertised listings is expected in the first quarter of 2023, which is likely to provide more choice for renters and demand-driven shifts such as more share housing, and internal migration to more affordable markets, may also help to ease rental conditions.
