Rent rises beginning to ease as affordability constraints set in, says Corelogic

Australians have seen rental costs increase rapidly over the last year, but there are signs growth has begun to slow as affordability constraints start to kick in.

CoreLogic’s latest Quarterly Rental Review recorded the smallest monthly increase of 2022, with rents rising just 0.6% in the month to September and 2.3% over the September quarter.

“The past few years has seen unprecedented growth in rental values,” says CoreLogic research analyst and report author Kaytlin Ezzy.

“We saw rents fall marginally over the first few months of COVID, but, since August 2020, national dwelling rents have surged almost 20%, equivalent to a weekly rent rise of approximately $90 per week.

“The slow down in the rate of rental growth may suggest an increasing number of prospective tenants are starting to come up against affordability constraints.”

Why is rent so expensive?

The low supply of rentable properties continues to be a significant problem. Throw rising interest rates into the mix and landlords are increasing prices to keep up with investment loan costs.

“One factor which has likely negatively impacted rental supply is the decline in investor purchasing activity between early 2017 and early 2020,” Ezzy says.

“Through this period, a mix of temporary changes to mortgage lending conditions, and the uncertainty surrounding the onset of COVID-19 limited residential property purchases. 

“Additionally, CoreLogic recorded an increase in investor-owned housing stock being listed for sale through 2021 and into 2022.”

Experts believe increasing the supply of private housing options can help bring down rent and house prices. 

The Grattan Institute, an independent economic research think tank, suggests that rent could decrease by 10-20% if 50,000 homes were built annually for a decade. 

But this is easier said than done. Building more properties would require state and local governments to reform planning restrictions to allow more housing development. 

This doesn’t even factor in the slowdown in construction over the last few years due to record-high building material costs and worker shortages.

What to do if your rent is too much?

If you’re receiving government payments like Youth Allowance or JobSeeker, the government provides a $150 fortnightly rental assistance payment per single person.

If you’re not on government assistance, one way to save money on rent is to talk to your landlord and negotiate your rent price. Or you could move in with roommates or a significant other to lower rent and living expenses. 

Alternatively, you could investigate if what you pay in rent is similar to owning property elsewhere. When you search for units or houses outside the CBD of a major city, you’ll be surprised to find much cheaper options. 

If buying a house is on your horizon, compare home loan options below.