Perth has had the strongest rental growth across the capitals, up 13.6 per cent to $669 per week in the past 12 months, according to new data released on Monday.
CoreLogic’s rent report found Perth is now the third most expensive rental market in the country, behind only Sydney ($770) and Canberra ($674), having overtaken Victoria.
Serpentine-Jarrahdale had the largest annual rent growth across what the Australian Bureau of Statistics terms Australia’s “statistical area level 3” markets, at 19 per cent, followed by Belmont-Victoria Park at 17.8 per cent and Armadale and Mundaring at 17.2 per cent apiece.
While one-fifth of Australia’s SA3 markets analysed currently have rents below their peak, all Perth’s are at a record high, while just three regional WA markets are below peak.
Experts pointed to a few reasons for the staggering increase post-COVID, especially a lack of supply, as well as the move from share houses into smaller households with spare rooms used as home offices.
Head of research Eliza Owen said renters were being forced into more affordable, peripheral markets.
“Areas where rents are slightly lower may offer more space for group households, or have slightly less competitive rental conditions which are potentially being more targeted by prospective tenants,” she said.
“On the demand side, experimental estimates from the ABS suggest average household size only continued to decline, to 2.5 people in June 2023.
“This comes despite a material uplift in group households, which was far outpaced by a rise in lone and two-person households.”
Owen said given there was little to be done on supply in the short term, reprieve was most likely to come from a moderation in net overseas migration, as some temporary migrants started to depart, and for arrival numbers to normalise post-COVID.
“Centre for Population forecasts indicate this could occur from next financial year,” she said.
“Until then, renters may be seeking more shared accommodation, or exploring cheaper rental markets across the outer metro fringes or regional Australia.”
Ray White chief economist Nerida Conisbee said the market was “really stuck”.
“We’ve got construction problems, we’re lacking the money to get these homes built and governments are so indebted after COVID there are not many levers they can pull,” she said.
She predicted the federal government would include more funding for build-to-rent projects to counter dwindling private investment in the upcoming budget.
“But it’s just not really a solution that will lead to the 1.2 million homes that they’re hoping to see over the next five years,” she said.
AMP chief economist Shane Oliver said the number of people per household declined during the pandemic.
“It led to people not wanting to share, but they could also afford not to share,” Oliver said.
This caused a “spreading out” of people who would usually live together, he said.
“[Then] migration and student arrivals started again,” he said.
“We’ve got to get back to a unit-building boom.”
Shane Oliver, AMP chief economist
“Odds are we will see people sharing, moving back with parents or staying at home for longer.”
If people did start to form larger households, it could take some of the heat out of the market, but prices would stabilise rather than fall, Oliver said.
“To get a fall, you need more supply,” he said. “We’ve got to get back to a unit-building boom.”
Property Council of Australia group executive policy and advocacy Matthew Kandelaars said the Australian Bureau of Statistics releasing building approvals data painted a grim picture for the nation’s ability to meet its ambitious targets.
He said their rise in March, while welcome, was from a low base and still lower than 12 months ago – a “drop in the ocean”.
“While Victoria and Western Australia saw a slight rise … every other state saw dwelling approvals fall,” he said.
“The supply of new homes is constrained by a dire shortage of labour, alongside complex planning regulations and broken tax systems that are deterring investment, particularly foreign investment.”
Kandelaars said the government needed to adopt a pro-construction adjustment, in a smaller migration intake, to ensure enough skilled workers to build the homes required.
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