Asking Rents Are Set To Surge

A lack of available rentals which has seen vacancy rates plummet to a new 16-year low, may see asking rents surge by as much as 15% nationwide this year according to research by SQM.

Available stock dropped from 1.3% January to 1.2% of total rentals in February – the lowest since December 2006 when the vacancy rate hit 1.1%.

All markets were now in rental undersupply after vacancy rates fell below the 3% threshold for a balanced market and the imbalance had pushed asking rents to 9.4% nationally over the year to March 12.

This was the sharpest rise in five decades and spelled bad news for those hit by inflation according to SQM managing director, Louis Christopher.

“Because the rental market is seriously stretched right now, we could see rents rising by at least 10% nationwide over 2022,” Mr Christopher said.

Housing costs account for approximately 23% of the CPI basket and steep rent rises had major ramifications for inflation.

Mr Christopher added that vacancy rates are likely to fall again over March.

“The first week recorded yet another decline in rental accommodation listings, and the impacts of the flood have not yet been reflected in the data, so we can expect rental vacancy to tighten again,” he said.

Across the country, every city aside from Sydney and Melbourne posted less than 1% vacancy rate last month, while Sydney’s vacancy dropped to 2% and Melbourne’s to 2.3%.

Further, the vacancy rates for apartments in the CBD fell sharply during February, coinciding with the return of international students.

The proportion of rental apartment in the Sydney CBD left vacant dropped to 4.3% from 4.5% in January while Melbourne saw its CBD vacancy rates drop 1.2% to 2.8%.

Brisbane faired similarly with the vacancy rate falling 1.4% to 4.4% and Adelaide was down by 1% to 1.7%.

Australia’s luxury home market is experiencing an “unprecedented surge in prices” due to a limited supply of large homes close to beaches, bays and rivers and strong demand from Australia’s growing high-net-worth population, according to Ray White senior data analyst Atom Go Tian.

The inaugural Ray White Luxury Report reveals luxury homes have risen in value at a much faster rate than median-priced properties across the capital cities over the 10 years from 2014 to 2023. Luxury house prices rose by 84 percent over the decade compared to 70 percent for median-priced houses. Luxury apartment prices soared 58 percent while median apartment prices rose 31 percent.

However, there was a change last year when median prices grew faster than luxury prices for the first time in the decade. CoreLogic analysis shows higher interest rates, which limited people’s borrowing capacity, and rising prices appeared to turbocharge buyer demand in more affordable markets across Australia, with Perth experiencing the most growth among the capital cities in 2023.

Mr Go Tian said some key trends in Australia’s luxury market over the past decade included Brisbane booking the fastest rise in prestige transactions among the major cities, as well as the emergence of the Gold Coast as a “rapidly growing” luxury apartment market. Sydney is the largest prestige market, accounting for 64 percent of national luxury house sales and 51 percent of luxury unit sales.

Interestingly, Australia’s second-smallest capital city – Hobart – recorded the highest luxury house price growth over the decade at 122 percent and the highest luxury apartment price growth at 101 percent.

Here is a summary of the report’s findings on the price growth of Australia’s luxury homes.

Sydney

The luxury house price median is $3.9 million, up 93 percent over the decade, while the median house price is $1.4 million, up 72 percent. In 2023, the suburbs that recorded the most luxury house sales above $5 million were Mosman, Vaucluse and Bellevue Hill. The luxury apartment price median sits at $2.1 million, up 72 percent, while the median apartment price is $794,000, up 25 percent. The suburbs with the most luxury apartment sales above $3 million were Mosman, Darling Point and Pyrmont.

Melbourne

The luxury house price median is $2.5 million, up 71 percent over the decade, while the median house price is $933,000, also up 71 percent. In 2023, the suburbs that had the most luxury house sales above $5 million were Toorak, Brighton and Kew. The luxury apartment price median is $1.3 million, up 51 percent, while the median apartment price is $603,000, up 27 percent. The suburbs with the most luxury apartment sales above $3 million were Toorak, Melbourne CBD and Brighton.

Brisbane

The luxury house price median is $1.8 million, up 103 percent over the decade, while the median house price is $838,000, up 82 percent. In 2023, the suburbs that recorded the most luxury house sales above $5 million were Hamilton, Park Ridge and New Farm. The luxury apartment price median is $1.1 million, up 51 percent, while the median apartment price is $554,000, up 35 percent. The suburbs with the most luxury apartment sales above $3 million were New Farm, Newstead and Brisbane City.

Perth

The luxury house price median is $1.7 million, up 49 percent over the decade, while the median house price is $676,000, up 25 percent. In 2023, the suburbs that had the most luxury house sales above $5 million were Cottesloe, Dalkeith and Mosman Park. The luxury apartment price median sits at just over $1 million, up 15 percent, while the median apartment price is $453,000, up 0.7 percent. The suburbs with the most luxury apartment sales above $3 million were South Perth, North Fremantle and West Perth.

Adelaide

The luxury house price median is $1.6 million, 2.2 times higher than in 2014, while the median house price is over $700,000, up 78 percent. In 2023, the suburbs that had the most luxury house sales above $5 million were North Adelaide, St Peters and Medindie. The luxury apartment price median is $994,000, up 52 percent, while the median apartment price is just under $500,000, up 44 percent. The suburbs with the most luxury apartment sales above $3 million were Dulwich, Adelaide CBD and Glenelg.

Hobart

The luxury house price median is $1.5 million, up 122 percent over the decade, while the median house price is $742,000, up 112 percent. In 2023, the suburbs that recorded the most luxury house sales above $5 million were Sandy Bay, Old Beach and North Hobart. The luxury apartment price median sits at $1.04 million, up 100 percent, while the median apartment price is $564,000, up 102 percent. The suburbs with the most luxury apartment sales above $3 million were Sandy Bay, Battery Point and Hobart.

Darwin

The luxury house price median is just over $1 million, up 18 percent over the decade, while the median house price is just over $600,000, up 5 percent. In 2023, the suburbs that recorded the most luxury house sales above $5 million were Larrakeyah, Darwin City and Palmerton City. The luxury apartment price median is $724,000, down 0.6 percent, while the median apartment price is $388,000, down 12 percent. The suburbs that had the most luxury apartment sales above $3 million were Fannie Bay, Darwin City and Larrakeyah.

Asking Rents Are Set To Surge

As vacancy rates plummet, rents could go up 15%.

A new property report reveals an ‘unprecedented surge’ in luxury home values as demand continues to outstrip supply