Australia’s median weekly rent hits painful all-time high, but is this an opportunity for investors?

In December 2023, Australia’s rental market experienced a record-breaking increase in weekly rental values, placing even more pressure on renters across the country. Let’s take a look at the catalyst for this increase, and what it means for renters and investors alike.

New research from CoreLogic¹ suggests the national median rent figure escalated to a record $601 per week in December (or a whopping annual rent of $31,252). This is a steep climb from the $437 weekly rent seen in August 2020… which means renters are, on average, required to pay an extra $8,000 per annum in rent.

The increase in national rent figures, which surged by 8.3% over the last year, has outstripped the average growth rate of the past decade. The last three years alone witnessed rent values skyrocketing by an average of 9.1% annually, a sharp contrast to the modest 2.0% yearly growth experienced during the 2010s.

Interestingly, this rise in rental costs is not uniform across the country. Sydney’s median weekly rent hit $745, Hobart’s increased to $535 and remarkably, only Canberra and Hobart saw a dip in rental prices.

Rental affordability has also taken a hit, with the share of median household income needed to meet the median rent escalating from 26.7% in March 2020 to 31.0% by September of the previous year. This suggests that rental prices are climbing at a rate that outstrips wage increases, placing renters, often earning less than homeowners, in a tough spot.

What’s causing this steep increase in weekly rent?

Several factors are driving this sharp increase in rents: a shift towards smaller household sizes due to fewer shared living arrangements, population growth as a result of the reopening of international borders, and a slowdown in investment in housing prompted by rising interest rates. Long-standing challenges like the dwindling supply of social housing and falling homeownership rates also continue to place pressure on the market.

However, despite this recent surge in rental costs, there’s light at the end of the tunnel. Expectations point towards a cooling in rent increases due to a pick-up in investment lending, a return to normal levels of overseas migration, and the potential for cuts in the cash rate.

What does this mean for renters and investors alike?

The struggle is real for many Australian renters, with a survey by InfoChoice² revealing that seven out of ten renters find themselves overburdened by rent costs, dedicating more than 30% of their income to housing. Furthermore, an overwhelming 96.2% of participants expressed their belief that the federal government needs to take more proactive action to mitigate this rental affordability crisis.

This trend not only puts financial pressure on renters but also limits their ability to save for future goals (such as, ironically, purchasing a home). Renters may need to explore various strategies to manage these costs, such as share housing, looking for rental properties in more affordable areas, or negotiating terms with landlords.

For those ready to become property investors, the current market presents both opportunities and considerations. The rise in rental prices indicates strong demand and the potential for high rental yields, making property investment an attractive option for generating passive income.

However, investors must also be mindful of the broader economic factors, including interest rate trends, changes in housing policies, and market fluctuations, which could impact their investment’s return.

Investors will benefit from researching these data points:

Interest rate trends
Changes in housing policies
Property location
Property type
Tenant demand and potential affordability issues
Long-term trends in the local and broader market

Can we help you escape the rental market… or become a property investor so you can take advantage of it?

If you’re looking for an expert team (and a broker with premium status) to help you buy your first home or become a property investor, request a Free 30-Minute Finance Strategy Session during which you will…

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Learn about our process to find you a loan that could save you thousands.
This no-obligation free session will be held with one of our experienced mortgage brokers.

Please be assured this will not be a thinly disguised sales presentation. On the contrary, you’ll receive our best strategic advice, specific to your situation, so you too can accumulate multiple properties without sacrificing your current lifestyle and accelerate your progress towards wealth.

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Please note, the numbers and assumptions listed in this article are for educational purposes only. Individuals should seek specific advice pertaining to their unique situation and the real estate market before making any decisions.

Trilogy Funding Two is a corporate credit representative (Representative Number 506131) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237)

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About the Author

Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.

Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.

David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).