Brief
- Renters have hit an affordability ceiling, signalling a market shift, according to Domain.
- Rents are at record highs, with weaker quarterly growth but stronger annual rises, PropTrack says.
Australia's rental market could be at a tipping point, new data suggests, as renters hit the limits of affordability across capital cities.
In what Domain has labelled a "defining shift" in its March quarter rental report, released on Thursday, tight vacancy rates — which nationally have fallen to 0.7 per cent — are no longer enough to push rents up across the board.
Instead, it said rent price growth has become increasingly uneven across the country, putting a lid on what renters are willing to pay.
Alice Stolz, national property editor at Domain, said the data revealed Australia's rental market has entered a new phase, where renters "have hit their affordability ceiling".
"What that means is the amount tenants can pay can no longer be stretched," Stolz told SBS News.
"They have been pushed and prodded, they had to compromise for property they looked at, compromised at the location they look at, perhaps moving out further in the suburbs, moving away from the city.
"But now we are ... at a point where there's nowhere else to go."
Rent prices across Australia are largely at record highs, but the pace of growth has slowed, according to Domain.
There was no quarterly rental growth in Sydney and Canberra for either houses or units. Weekly rents remained at $800 for houses and $750 for units in Sydney, and $700 for houses and $580 for units in Canberra. Darwin house rents also remained flat at $720 a week.
Domain said price growth "remains patchy" in Melbourne — where median rents are $590 a week for houses and $600 for units — and appears "seasonal rather than sustained" in Adelaide, where median rents are $590 for houses and $550 for units.
Annual price growth across the capitals ranged from 0 per cent to 10 per cent.
Stolz said rental supply remained and issues and believed the problem could party be due to investors shifting away from the market due to concerns of government reforms on capital gains tax and the tightened tenancy laws.
Treasurer Jim Chalmers has signalled there would be tax reforms in the federal budget next month, but he didn't confirm if that included capital gains tax, which offers a discount when you sell an asset like a house after owning it for at least 12 months.
But Stolz added that some properties have transferred from rental to home ownership, with more first home buyers entering the market.
"I think to find an equilibrium [between the two markets], it's all about supply, not just in the rental market, but also in the home ownership market," she said.
"If we have the right type of property in the right locations that people want to live, and that means our capital cities as well as big regional centres, we offer people a choice of housing and it’s affordable."
Separate data from REA Group's PropTrack quarterly rent report, also released on Thursday, found combined capital city rents had reached a record $680 a week, while quarterly growth was weaker but stronger on an annual basis.
"Rent growth remains solid, up 4.6 per cent in the past year across the capital cities. While still firm, rent growth remains below the peak levels seen in 2022 and 2023, as somewhat improved rental availability, as well as strained rental affordability, has slowed the pace of rent increases," the report said.
Angus Moore, senior economist at REA Group, said rental affordability had fallen to "the lowest" in its records since 2008, but noted that investors still remain "an active segment" in the market.
He said supply issues were due to lagging home construction, and it would take time for Australia to catch up.
"The fact that rental availability is so limited reflects that there’s a lot of demand for rentals, and not a lot of rental properties available, which means that they get snapped up very quickly when they do become available," he told SBS News.
"And that limited availability [is] putting pressure on rents and [that's] why we continue to see relatively solid record [of rents]."
Rumoured changes to capital gains tax in the upcoming May federal budget have sparked concern among some property groups, who argue that major changes could cause property investors to leave the market, impacting rental supply and pushing up prices.
Public policy think tank the Grattan Institute has proposed to reduce the 50 per cent capital gains tax discount to 25 per cent in a five-year period as part of housing reform.
Ashleigh Chang, an associate at Grattan Institute's housing and economic security program, told SBS News that while the proposed measure may decrease the number of new homes being built by 10,000 over 2030, it could raise about $6.5 billion a year for the federal budget.
The think tank has argued that the increased budget could be used to support low-income renters through programs such as rental assistance.
Chang noted that the reduced discount would only have "small impacts" on median rents.
"The main focus, from our perspective, should be on supply."
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