Rate hikes and tight vacancies hit Australian renters as capitals soar to record heights

Australia remains a landlord’s market, according to Domain. Its latest rental report revealed an eye-watering wave of rent hikes across the country over the last year, which may make it difficult for renters keen to save for a home loan

While some capitals stayed liveable and reasonably affordable, Sydney has now become Australia’s most expensive city to rent a house – and for the first time ever, units may be less affordable for tenants than houses in the Emerald City. 

Let’s break down what you need to know.

Why are rents in Australia so high right now

Tight supply, limited renter protections, and the aggressive round of rate hikes from the Reserve Bank of Australia have all made it a perfect storm for rental prices, says Domain. Year on year, median rents across the nation’s capitals rose 11.5% – one of the fastest paces on record. 

Domain chief economist Nicola Powell says strong demand has collided with weak supply, which paints a complicated picture of who exactly is to blame. Yes, landlords have passed along increases in their monthly investment mortgage payments to their tenants, which has contributed to significant price pressure. For someone with a $500,000 investment home loan, surging variable interest rates would have added over $1,200 to their repayments since last year. 

However, supply has dwindled due to a wave of overseas migration, particularly temporary visa holders and international students – two groups that need to hit the ground running by immediately finding somewhere to live.

Material inflation and labour shortages have also stalled the construction of new properties, delaying or preventing the building of new places to rent altogether. And with the cost of financing a property now unattainable for many, even investors have shied from dipping their toes into the property market. 

“Australia is likely to remain a landlords’ market for some time,” warns Powell, “but conditions are beginning to see a marginal improvement for tenants. Despite vacancy rates remaining stubbornly tight, all capital cities and regional Australia have increased from recent historic lows.”

So what’s the story in individual capital cities?

Sydney

  • Sydney is now the most expensive place to rent a house in Australia
  • Unit prices rose faster than houses – the sharpest on record

Sydney has overtaken Canberra as the most expensive city to rent in Australia. Median unit prices shot well past houses, surging 8.1% compared to 6.1%, which Powell credits to unit proximity to the inner city. After all, unit capital growth is readily turbocharged by closeness to roads, shops, and amenities, all of which are incredibly desirable to renters. 

“Despite a recent improvement in the vacancy rate, a significant supply boost is needed to alleviate tight rental conditions, suggesting the outlook remains challenging for tenants,” says Powell. 

Now, depending on where you look, a house may be cheaper to rent in Sydney than a unit, and the price gap between the two is remarkably close at $700 and $670 a week, respectively.

Melbourne

  • Units hit a record high, but price growth has slowed annually
  • House rental prices record lowest median of any capital city at $520 weekly

Often called the most liveable city in Australia, Melbourne’s 13% rental price growth did not bring values nearly as high as other capital cities. Despite a massive population boom, Melbourne’s abundant supply and roomy city limits have reined in some of the sillier numbers. 

However, while it may be affordable, Powell says the competition in Victoria’s capital could soon get steep. 

“Though Melbourne unit rents hit another record high, the quarterly and annual change has slowed marginally but remains high relative to previous years,” explains Powell. 

“This is not just a pandemic rebound. This is more than that. It’s the rate of growth other capital cities saw in the lead up to this period.”

Canberra

  • Units plateaued at a median rental price of $550
  • House rental values fell for the first time since 2014

As one of the few cities to actually experience a decline in rental values, Australia’s capital of capitals makes a unique and compelling case study. House rents experienced their steepest quarterly decline and fell annually for the first time in nearly ten years. Units, on the other hand, had no year-on-year change, coming $10 under late 2022’s record high. Great news, too, because until this year, Canberra was the most expensive city to rent in Australia.

“Tenants here are in a much better position relative to any other capital city,” explains Powell. “Canberra has the highest vacancy rate, and the available rental supply has more than doubled annually.”

Brisbane

  • Units saw their steepest quarterly growth since 2008
  • House rents rose over double the previous quarter

Brisbane has seen some record increases in rent, with Brisbane units specifically finding a major increase quarterly and annually. Rental units saw an annual increase of 17.8% and a rose 6% over the last quarter. According to Domain’s report, the gains made over the quarter were the third fastest on record and the steepest since 2008.

On the other hand, annual growth for houses in Brisbane eased to its slowest since September 2021. Despite this, June still saw an acceleration in house rental increases at 3.6% over the quarter and 11.5% over the year.

Adelaide

  • Houses saw rent increases grow for the 12th quarter
  • Units saw a record high in the June quarter 

House prices in Adelaide saw an uninterrupted line of rent increases for 12 quarters in a row, gaining 3.8% in the June quarter and an annual increase of 12.5%. However, even though Adelaide house rentals increased, growth lagged both quarterly and annually. 

The June quarter also created a record high in Adelaide unit rents and a faster annual rise over houses. However, much like houses, units annual growth eased with a halving in quarterly growth over the previous quarter. 

Powell explains, with quarterly growth halving and annual growth falling behind from last years, that “conditions are starting to shift marginally as the vacancy rate increases”.

Darwin

  • House rents hold steady
  • Unit rents fell in the June quarter

House rents in Darwin stayed steady during the June quarter, while unit rents actually decreased -1.1%, recording only 6.2% annual growth.

According to Powell, the unusual dichotomy of stable or falling prices with high vacancy rates may suggest that affordability might be a significant wall for tenants.

Hobart

  • House rents fell for the first time since 2013
  • Unit rents fell during the June quarter

Houses in Hobart experienced their first fall in a decade over the June quarter with a recorded decrease of -3.6%. Meanwhile, unit rents also saw a decline of -6.3%, making Hobart and Darwin the only cities to so far witness a fall in unit rents during the June quarter. So far, the median price sits at $450 for units and $515 for houses. 

Powell points out, “Tenants are in a much better position [in Hobart] than other capital cities. Hobart has the second highest vacancy rate out of all the cities, and available rental supply has more than doubled annually, helping to push Hobart’s vacancy rate to the highest since April 2020.”

Perth

  • Houses and units both saw an acceleration in rental growth
  • Both rose at about one and half times faster than the previous quarter

Perth has become an extremely competitive city for tenants, recording a massive jump in house and unit rental asking prices. All properties surged one and half times faster than the previous quarter.

Houses hit record levels for their rental yields during the June quarter – a trend that has continued since early 2022. Unit rentals also saw the steepest annual increase in around a decade. 

Ready to jump out of the rental market? Compare home loans in the table below.

Home loan comparisons on Mozo

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Last updated 23 July 2024 Important disclosures and comparison rate warning*
  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
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    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Optimum Fixed Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    Interest rate
    5.69 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,899
    Go to site

    Lock in a competitive interest rate and enjoy peace of mind for the fixed period. Available for owner occupied new and refinanced home loans with at least 20% deposit. Split option available as well as offset and redraw. Noapplication, ongoing or banking fees. Third Party fees may be applicable - payable within loan repayments. Extra repayments up to $20K per annum permitted. Apply online, 100% member owned credit union.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • OMG Home Loan

    • Owner Occupier
    • Principal & Interest
    • <60% LVR
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.02 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    BCU Bank’s OMG owner occupied home loan offers a variety of great low rates depending on your deposit. Save with no ongoing annual fees. Access your extra payments when you need to through the redraw facility. Pre-approval valid for 3 months.

  • Flex Home Loan

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    • LVR <60%
    Interest rate
    5.99 % p.a.
    Fixed 3 years
    Comparison rate
    6.34 % p.a.
    Initial monthly repayment
    $2,995
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    Competitive Fixed rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Express Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <90%
    Interest rate
    6.01 % p.a.
    Variable
    Comparison rate
    6.14 % p.a.
    Initial monthly repayment
    $3,001
    Go to site

    Get online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.

  • Neat Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <60%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.11 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

  • Special Real Deal Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Variable
    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
    Go to site

    Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Flex Home Loan

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    • LVR <60%
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    6.14 % p.a.
    Variable
    Comparison rate
    6.38 % p.a.
    Initial monthly repayment
    $3,043
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    Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process. 40% deposit required.

  • Offset Home Loan

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    6.14 % p.a.
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    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
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    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Basic Home Loan

    • Fixed
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    • Principal & Interest
    • LVR<70%
    Interest rate
    6.25 % p.a.
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    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
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    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $10,000,000.

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    • Fixed
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    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
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  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.54 % p.a.
    Fixed 2 years
    Comparison rate
    7.10 % p.a.
    Initial monthly repayment
    $3,174

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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