Australia’s rental market stalls amid affordability squeeze, according to new Domain data

Rental prices in most major capital cities are either stalling or recording their slowest growth in years, new data shows, in a welcome reprieve for millions of crunched households.

Fresh data from property listings platform Domain showed weekly house rents in Melbourne, Brisbane, Adelaide, Canberra and Hobart all posted flat growth in the June quarter. Weekly house rents in Sydney jumped 0.6 per cent from $775 to $780.

In Perth, house rents lifted 0.7 per cent, or $5, to a fresh high of $700 a week in the three months to June.

This marks the fourth consecutive quarter of growth and means Perth now sits alongside Canberra as the second most-expensive city to rent a house, behind Sydney.

Darwin posted the biggest fall in house rent, down 2.9 per cent from $700 to $680.

Domain said while house rents remained at record highs in all capital cities except Darwin, the growth was stalling.

Sydney, Melbourne and Brisbane recorded their slowest June quarter growth in years, with near zero movement in price.

“Cost of living pressures have reached a tipping point. Renters are maxed out and landlords are being forced to hold steady,” Domain chief of research and economic Nicola Powell said.

“We’re also seeing a shift in demand — renters are downsizing or choosing units to stretch their budgets, which is why unit rents are now rising faster than houses.”

Bankwest Curtin Economics Centre director Alan Duncan said a weekly rent of $700 in Perth would eat up about 62 per cent of the average single person’s $1125 disposable income — more than double the threshold that constitutes mortgage stress.

A couple renting together would have to cough up about one-third of their combined $2080 weekly disposable income for rent.

“The rental cost burdens have been relentlessly increasing for years and a lot of it is to do with a lack of rental supply,” Professor Duncan said.

“There’s no doubt it’s creating more pressure on household budgets, even $5 a week adds to cost pressures.”

In Perth, Professor Duncan said there were more renters in rental stress than homeowners in mortgage stress.

“The share of those in rental stress is far higher than those in mortgage stress,” he said.

“This is what tends to happen when you have a supply shortage and that really ramps up rental costs.”

Generally, households spending any more than 30 per cent of pre-tax income on rent or mortgage repayments is considered in housing stress.

Despite a slight easing in some cities, national vacancy rates are still below 2 per cent. Darwin is the tightest market in the country, with a vacancy rate of just 0.3 per cent.

“A balanced market requires a rental vacancy rate of around 2.5 per cent minimum,” Professor Duncan said.

“However, even when the vacancy rate starts to increase, the markets start to loosen, it can take between 12 and 18 months for that to translate to substantial lower rental costs.”