Rent Increase Across States: Understanding the Rental Market

Access to affordable rental housing is crucial for the wellbeing of renter households in Australia. Nearly 30% of all households in the country rent their homes in the private rental market. However, renters typically have lower incomes than owner-occupier households and spend a larger share of their disposable income on housing costs. In recent years, the rental market has become more challenging for renters due to a decline in vacancy rates, which has resulted in increased advertised rents and difficulty finding suitable rental properties. Policymakers need to understand the rental market's impact on household consumption, savings patterns, and inflation.

To measure rents in the CPI indicator, the ABS has incorporated a new data source from July 2022. This new dataset contains variables such as weekly rent, property characteristics, lease start and end dates, and a unique property ID. While the dataset includes private rental properties, it does not account for rental assistance, which is included in the CPI measure. The CPI measure represents prices for both public and private rental markets.

Median weekly rents have increased in all states since 2021, with the highest in the ACT at $560 per week and the lowest in South Australia at $380 per week. The majority of lease agreements are for 12 months or less, and around 2-3% of rental properties have a change in tenant each month.

The rental market has experienced rising median rents in all states since 2021. While the COVID-19 pandemic initially caused rents in some capital cities to decrease due to weak demand, rents in both capital cities and regional areas have picked up recently. Rent increases have become more frequent and larger for most properties in capital cities, regardless of whether the tenants are new or existing. Expensive rental properties have experienced higher rent increases than less expensive properties, which puts pressure on household budgets, particularly for lower-income households.

Actual rents paid by new tenants have increased by 14% over the year to February 2023, while advertised rents have increased by 22%. Rent inflation for apartments with new tenants has been more volatile than for houses and townhouses. If vacancy rates remain low, then advertised rents are likely to continue increasing, which will impact the CPI both directly and indirectly.

It is crucial for renters to have access to affordable rental housing, and policymakers need to understand the rental market's impact on household consumption, savings patterns, and inflation. Understanding the rental market can provide valuable insights for investment decisions.

Source: https://www.rba.gov.au/publications/bulletin/2023/jun/new-insights-into-the-rental-market.html