Rental pressure not set to ease off for the rest of 2012

Written by Pamela Bennett in National on April 26, 2012

The notably tight rental market of 2011 left many debating whether buying was a more Rental Pressure unlikely to ease off in Australia 2012affordable option than renting.  As we reflect back on the past year, it is clear that rents are on the rise.  Recent figures released by the Real Estate Institute of Australia indicate that overall rental pressure is not likely to ease any time soon, as the demand for rental accommodation is still strong, with the average vacancy rate remaining below the industry benchmark.

Quarterly Median Rents of Three Bedroom Houses ($ Per Week)

A mixed bag of results for the rental market in Q4 2011

December quarter median rents published by REIA for a 3 bedroom home indicate that both Sydney and Perth are becoming increasingly less affordable than they already were.  Median rents for a 3 bedroom house in Sydney and Perth increased 5% from the previous quarter to $420 per week. However, year on year Perth median rents saw a much larger rise increasing by more than 10.5% from $380 per week in Dec 2010 to $420 per week in Dec 2011.  This increase is another sign of Australia’s two-speed economy and is being driven by interstate migration with the many new arrivals in Western Australia causing a tightening in the Perth vacancy rate by 1.1% over the year.

Melbourne, Brisbane and Adelaide have remained a little more subdued with no increase recorded from the previous quarter.  Year on year also depicts a similar story with modest growth in median rents for Melbourne and Adelaide rising in-line with inflation, whilst Brisbane remained static year on year.

A different picture was painted in Darwin, with median rents recording a 4% decline from $545 in the September quarter to $523 per week in the December quarter.  Median rental prices in the Territory have been impacted by renters exiting in favour of buying – with first home buyers’ loan commitments increasing by 21.5% over the same period.  This improvement in first home buyer activity means that demand for rental accommodation has eased, with the vacancy rate easing by 0.2%.

The outlook for 2012

Ultimately the outlook for the rest of 2012 is largely dependent on what happens to interest rates as demand for rental accommodation is driven up by those who choose renting over buying.  If renters are enticed into buying their own home, it is likely we will see rental pressures ease.