Finding a rental property has become increasingly challenging throughout Australia, even with the recent surge in housing availability. The dramatic competition for rental homes has even led many prospective tenants to escalate their offers, paying above the quoted asking price to lock down a rental home.
To better comprehend the present state of this phenomenon, this article delves into the causes behind the tightly contested rental market and identifies specific areas where renters are paying the most over advertised prices.
The rental vacancy rate in Australia hit an all-time low of 1.31% in March 2023. According to recent data, the number of available rental homes in capital cities has plummeted by 21% compared to one year ago, meaning many citizens are scrambling to find suitable rental properties.
Interestingly, those properties that are listed for rent these days are being occupied at a faster rate than before. Compared to early 2021, rental properties are on the market for 24% less time overall, with Sydney and Melbourne witnessing even more significant drops in vacancy lengths.
Demand for rental properties has spiked for various reasons. The reduction in average household sizes and an influx in net overseas migration, for example, have both contributed to the heightened need for more rental homes. Moreover, a shortage of construction materials has caused project delays, which, in turn, has slowed the overall rate of new home construction.
These factors have triggered a surge in landlord-tenant competition, with prospective renters even offering larger sums to guarantee their spot within a desired property. In Sydney alone, renters are offering higher-than-asking prices in almost half of the city’s local government areas (LGAs). This phenomenon extends primarily to properties situated close to the central business district (CBD), reflecting the increased intensity of competition in the rental market.
Additionally, the median bond price in popular neighborhoods like Hunters Hill and Bayside councils is 23.1% and 19.5% higher than advertised rent prices respectively. These heightened bidding trends can be attributed to the return of migrants, in-person university classes, and a shift towards hybrid working.
Melbourne has experienced a similar trend, with people paying more than advertised rents in 14 of 33 council areas. Most notably, Yarra, Port Phillip, and Brimbank areas saw renters paying 7.6%, 6.2%, and 5.3% more than advertised rent prices, respectively. In stark contrast to Sydney and Melbourne, rental properties in Brisbane saw offers fall short of the listed price in the March 2023 quarter.
Looking ahead, rental vacancy rates are expected to remain consistently low throughout the year. As the nation continues to grapple with increased competition and demand — especially in high-footfall areas like inner-city neighborhoods — renters will likely face increased challenges in their hunt.
To ease these market pressures, focus should be placed on expanding housing supply and boosting rental availability. Initiatives like eliminating entry barriers for investors and increasing the number of homes built in high-demand locations will be critical in helping to make the rental market more affordable. In the meantime, renters should be prepared for the possibility of offering more than the advertised price to secure their desired rental homes.
