Renters hit with price jumps in 2021, property owners benefit
Last year, national rental prices saw an increase of 7.4%, making it the highest growth year since 2009. And now the average rental property in Australia is at $499 as of December 2021 compared to $465 in December 2020, says Domain's latest Quarterly Rent Report.
There is no easy way to view this if you’re a renter - despite the difficulties of the past few years rental prices continue to climb.
However, those who closely follow the property market know that this increase comes as no surprise. Late last year the Australian real estate market shattered all expectations and reached a value of $9 trillion, which also affected the renting market.
For example, most renters live in someone’s investment property, and if the cost of making that investment goes up, then sadly that means so will rent prices typically.
And surprisingly enough, rentals in regional areas saw a higher growth rate than capital cities.
“Regional rents continued to outpace capital city rents over the fourth quarter with regional dwellings rising 2.5% against the 1.6% rise in capital city rents, taking the annual regional rental growth rate to 12%,” says Corelogic's quarterly Rental Review.
In the last 10 years rent in regional areas increased by 33% compared to 25% growth across the combined capitals. Despite regional market rental price growth outpacing capital cities, it remains more affordable than the capital cities.
Stronger rental prices and growth across regional markets are due to the surge in regional population throughout the pandemic, especially across regional Victoria and NSW, says Tim Lawless, CoreLogic’s research director.
How much does it cost to rent in Australia?
Rent usually makes up a big chunk of a renter’s overall budget. The average Aussie renter spends 29% of their median income towards rent, says ANZ/Corelogic’s Housing Affordability June quarter report.
Let’s look at the proportion of total median income to pay rent across the states from the report:
- Australia - 29.4%
- Combined capital cities - 28.2%
- Combined regional areas - 32.7%
- Sydney - 30.8%
- Melbourne - 26.1%
- Brisbane - 27.9%
- Perth - 28%
- Adelaide - 30.5%
- Hobart - 33.9%
- Darwin - 28.9%
- ACT - 27.7%
Rent can also vary between apartments and houses. Below are the average rental prices of the major capital cities from Domain’s recent report.
Currently, Canberra is the most expensive city to rent, with Sydney following close behind. While shockingly enough, Melbourne is one of the more affordable capital cities to be a renter.
Should I switch positions and buy a property?
With rental prices on the move in most instances, you might be on the side of the ledger and considering buying an investment property to earn money from renters.
But whatever rental income you calculate on a prospective purchase, it will be greatly affected by the demand or lack of demand for your property. This is important because the price you pay on your investment home needs to be weighed up against potential rental amount coming in, as well as all of your outgoing costs as a property owner.
Recently, the median housing price in capital cities recently surpassed $1 million, and the average home loan size is at $600,000. As an owner, you need to cover this mortgage and other costs such as legal fees, council fees and stamp duty, and hopefully come out ahead with some profit. So where and when you buy is crucial to this equation.
If you’ve done your research, have the money and time to make the investment, it could be time to find a home loan while the interest rates are still low.