Rental conditions remain diverse across the nation, but there is growing evidence that rental growth is easing, according to CoreLogic. The national rental index increased a further 0.7% in June, still well above the pre-COVID decade average of 0.2% month-on-month, but a continued deceleration and the smallest monthly rise since January 2023.
The annual growth trend in rents was recorded at 11.5% across the combined capital cities, down from a record high of 11.7% over the 12 months ending April 2023. Across the combined regional areas of Australia annual rental growth has slowed to 4.9%, following the record high of 12.5% over the year to September 2021.
The slowdown in rental appreciation can be seen in most cities and regional markets to different extents. Canberra is the only capital to record a fall in rents over the past 12 months, down -2.8%, while declines in Hobart rents over the past two months have dragged the annual trend to just 1.3%. Both these markets have seen a loosening in supply and increase in vacancy rates. Although easing, the larger capitals continue to record stronger rental appreciation, especially across unit markets, where overseas migration and insufficient rental supply is continuing to place upwards pressure on rents.
Rental vacancy rates have generally ticked a little higher over recent months, but remain well below average levels. Higher vacancy rates are most evident across regional Australia, rising from 1.3% in February 2022 to 1.5% in June, however, even at 1.5%, the current rate is less than half the decade average of 3.3%. Vacancy rates across the combined capitals have risen from 1.0% earlier this year to 1.1%, but are holding well below the decade average of 2.8%.
Some cities haven’t seen any signs of vacancy rates easing. Adelaide is recording the lowest vacancy rate at 0.4%, up slightly from 0.3% in early 2022. Perth’s vacancy rate is holding at 0.7% and Melbourne’s is sitting at just 0.8%.
Despite such tight vacancy rates, it’s likely the trend in rental appreciation will continue to moderate, simply due to rental affordability pressures forcing a change in rental household formation. The early signs of a rebound in the average household size can already be seen in data published by the RBA.
Values increase in June, but at slower rate
Australian housing values moved through a fourth month of recovery with CoreLogic’s national Home Value Index (HVI) rising 1.1% in June, decelerating slightly from the 1.2% gain recorded in May.
Since finding a floor in February, the national measure of housing values has gained 3.4%, however, the market remains -6.0% below peak levels recorded in April 2022. That is the equivalent of the median dwelling value still being -$45,771 below a peak of $768,777.
Every capital city except Hobart (-0.3%) saw dwelling values rise in June, with CoreLogic’s research director, Tim Lawless, noting that Sydney continues to lead the cycle.
“Sydney home values increased another 1.7% in June, taking the cumulative recovery since the January trough to 6.7%. In dollar terms, Sydney’s median housing values are rising by roughly $4,262 a week,” he said.
A lack of available supply continues to be the main factor keeping upwards pressure on housing values, Mr Lawless said. “Through June, the flow of new capital city listings was nearly -10% below the previous five-year average and total inventory levels are more than a quarter below average. Simultaneously, our June quarter estimate of capital city sales.