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Australians and overseas migrants are returning to major cities, causing rental supply to slump and competition for vacant listings to heat up, a new report showed.
The latest PropTrack Rental Report for the December 2022 quarter showed total rental listings across capital cities fell 13.1 per cent month-on-month in December.
The figures are down 26.3 per cent year-on-year and are at their lowest level since February 2003.
Interestingly, the report highlighted that a different story is unfolding for regional areas due to an observed resurgence in the number of people returning to major cities and as the desire to escape the cities (which reached fever pitch during the pandemic) loses its grip on Aussies.
Throughout regional markets, total rental listings fell 6.8 per cent month-on-month but were 9.8 per cent higher year-on-year, the figure’s largest annual increase since June 2014.
Separate figures on average inquiries further showed divergent trends between the capital cities and regional markets, with inquiry per listing rising 31.3 per cent year-on-year across capital cities and falling 30 per cent in regional markets.
A year earlier, capital city property inquiries per listing were 20 per cent lower than in regional areas.
Data shows the largest increases in potential renters per listing in December were in Melbourne (54.6 per cent), Sydney (26.6 per cent), and Brisbane (13.6 per cent).
Cameron Kusher, director of economic research for PropTrack, said the report highlighted a clear shift in demand for rentals to the capital cities (particularly the larger ones) and away from regional areas — a trend that is expected to continue in 2023.
“With people now returning to capital cities and overseas migration lifting, it looks as if it will only become more difficult to rent a property in the capitals during 2023,” he stated.
“There remains an immense need for more rental accommodation, particularly in the major capital cities where demand is well in excess of supply.”
As tenants return to cities after a mass exodus during COVID-19 lockdowns and restrictions, the report noted that rental markets in areas like Melbourne and Sydney had received a fresh sugar hit.
“In Sydney and Melbourne, the two largest rental markets in the country, it is very clear that the supply of stock for rent is reducing quickly and demand for properties is increasing,” Mr Kusher said.
He further warned rental markets in the two biggest cities will be under further pressure. “Most of the overseas migration that will occur over the coming years will see those arrivals settle in these two cities, which will increase demand for rental accommodation,” he said.
PropTrack’s December data showed that Melbourne had the largest annual total listing decline at 36.5 per cent, followed by the 25.8 per cent fall in Sydney.
Overall, Mr Kusher said the national rental market remained tight, with supply of properties becoming available for rent remaining historically low.
New listings were down 6.6 per cent from December 2021 levels, and total rental listings dropped 19.5 per cent year-on-year nationally.
Despite tight market conditions, rental price growth was found to have slowed over the final quarter of 2022.
Median advertised rents were recorded at $480 per week at the end of December, with the figures unchanged over the quarter. Over the 2022 calendar year, national rents rose by 6.7 per cent, up from a 4.7 per cent increase in 2022.
But while national rents were unchanged on a quarterly basis, combined capital city rents rose 1 per cent to reach $495 per week and increased by 10 per cent throughout the year.
Across the combined regional markets, rents were also unchanged over the quarter at $450 per week and were 7.1 per cent higher year-on-year.
Of all the capital city and rest-of-state areas, only Sydney (1.8 per cent) and Melbourne (2.3 per cent ) recorded gains in rents over the December 2022 quarter.
Meanwhile, there were large declines in regional Northern Territory (down 7.2 per cent), regional Perth (down 3.2 per cent) and regional Tasmania (down 2.5 per cent ), with most other regions recording no change.
While conditions would continue to ease in the regions, it was unlikely the capital city rental squeeze would improve in 2023, Mr Kusher surmised.
“With low volumes of stock available for rent at a time when demand for rentals is strong and is likely to increase further, we expect the market to remain extremely challenging for renters,” he concluded.
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