First homebuyers have added impetus to make a deal before the end of the year with new data showing that rents are on the rise again.
The average rent is now $702 a week in Australia’s capital cities, which is 25% above the five-year average. Regional rents, while less expensive, are still not cheap. The average home is renting for just under $600-a-week ($591).
Prices are edging higher due to the lack of supply, according to the new “Quarterly Rental Report” published by the industry researcher Cotality (formerly CoreLogic).
The national vacancy rate now stands at record low of 1.47% with Adelaide (0.9%) and Perth (1.6%) being the tightest rental markets.
If you go back to pre-Covid times, the average vacancy rate was 3.3%.
The Cotality report observes that while landlords have been one of the most active buying segments in the past two years, their purchases have not kept up with demand.
The decreasing availability of rental properties is due to factors such as a lack of new properties coming onto the market, tougher rules for landlords in Victoria, a growing population and an annual immigration intake of more than 400,000.
Over the past five years, rents have increased 43.8% ($204) nationally, according to Cotality.
The value of tenancy renewals rose 1.4% year-on-year in the third quarter of this year (July 1-Sept 30). That’s the fastest growth we’ve seen since Q2 of 2024. Rents have increased 4.3% nationally over the past 12 months.
Cotality says that a “limited supply continues to be a major catalyst in rising rents, with the number of rental listings tracking 25% below the previous five-year average for this time of year”.
“Supply is particularly tight in the unit sector, especially in Sydney, which recorded both a new record low vacancy rate across its unit sector and broader dwelling rental market in September at 1.35% and 1.64% respectively.”
From the landlord perspective, the increasing value of property is squeezing rent yields – the measure by which investors and landlords gauge the quality of their investment.
Yield is a metric that measures the annual return generated by an investment property’s rent relative to its value or cost.
Cotality measured the current yields as follows: Darwin (6.47%), Perth (4.16%), Hobart (4.4%), Canberra (4.01%), Adelaide (3.58%), Melbourne (3.66%), Brisbane (3.55%) and Sydney (3%).
Here are six quick tips if you’re a first homebuyer trying to escape the rental trap:
Secure loan pre-approval – A loan pre-approval shows sellers and agents you are a serious buyer who can act quickly. It also locks in your borrowing limit, preventing you from overbidding in a hot auction or bidding environment.
Know your schemes – Research all available assistance immediately, such as the First Home Buyers Grant (FHBG) and Home Guarantee Scheme. Federal and state governments all have assistance programs, and they have very similar names.
Be auction ready – Spring and summer see a spike in auction activity. If buying at auction, know your absolute maximum price (and stick to it) and have your deposit ready to pay immediately.
Hidden Costs: Make sure you have the cash to cover fees such as stamp duty, conveyancing and legal fees, building and pest inspection, and lender fees.
Be flexible – With supply tight and demand high, competition is intense, especially for entry-level homes. If prices are getting a little hot, check out neighbouring suburbs one or two train stops further out, as they can offer better value and will allow you to escape those rising rents.