CoreLogic has released its quarterly rental review, which shows that rental growth accelerated in the first quarter of 2024 amid record levels of net overseas migration.
The median weekly rent value across all Australian homes reached a new record high of $627 per week at the end of March, with rental costs ranging from $770 per week in Sydney to $547 in Hobart (Figure 1).
Rather than being limited by affordability concerns, annual rental growth reaccelerated from the beginning of 2024. Nationally, annual rental growth increased from a previous low of 8.1% in October 2023 to 8.5% in April.
Even in markets where rents had previously been declining, values have stabilised or increased:
CoreLogic notes that record population growth via net overseas migration is driving the growth in rents:
“Net overseas migration in the year to September was just under 550,000, with temporary visa holders accounting for over 90% of this figure”, noted Eliza Owen, CoreLogic’s head of research.
“This means overseas arrivals were particularly likely to skew to rental accommodation through the period”.
“Considering an average household size of 2.5 people, net overseas migration levels implied new household formation of over 200,000 in the year to September”.
“At a time where supply constraints persist in the residential construction industry, only 173,000 new dwellings were completed in the same period”, Owen said.
Eliza Own also tipped further pain for renters given that net overseas migration is likely to remain historically high while housing construction is constrained.
“Given there is little that can be done on the supply side for renters in the short term, reprieve in the rental market is most likely to come from a moderation in net overseas migration, as some temporary migrants start to depart, and arrival numbers normalise post-COVID”, Owen said.
“Centre for Population forecasts indicate this could occur from next financial year. Until then, renters may be seeking more shared accommodation, or exploring cheaper rental markets across the outer metro fringes or regional Australia”.
The solution to Australia’s rental crisis is simple: cut net overseas migration to level that is below the nation’s capacity to build housing and infrastructure. Otherwise, the rental situation will continue to worsen.
Given that the rate of dwelling approvals continues to shrink amid high materials and labour costs, elevated interest rates, labour shortages, and widespread builder insolvencies, it makes no sense to run a historically high immigration program.
Doing so will only guarantee a never-ending shortage of rental homes and high rental price inflation.
