Australian rents soar to record highs as housing crisis bites

National median rents for Australians have reached record highs, CoreLogic data shows.

The median rent rose to $601 per week in December, or $31,252 a year, and increase of more than $160 since August 2020.

Average rent growths were 9.1 percent over the past three calendar years compared with 2 percent in the 2010s. Sydney recorded the highest median rent at $745 per week, while Hobart was the lowest at $535. Hobart recorded a -3.5 percent drop in median rents. Along with Canberra, which fell -1.9 percent, they were the only markets to experience a decline.

Author of the Rental Market Update and head of research Australia at CoreLogic, Eliza Owen, said factors such as an upswing in migration numbers since 2022 and the overall decline in the average size of households were contributing factors to the rise in prices.

It noted that the reduction in available social housing had placed further pressure on the private rental market, especially at the lower end.

While the figures are alarming to renters, the report noted that the rate of growth has slowed compared with recent years. Last year, rent values rose 8.3 percent, down from 9.6 percent in the year to September 2022. The contrast is even greater in regional areas where rents increased by 4.3 percent last year compared with 13.4 percent in the year to August 2021.

“The easing in rent growth is good news with regard to inflation, but there was a slight pick-up in annual growth once again in the final quarter of 2023,” Ms Owen said in the report. “This ‘re-acceleration’ in rents was most consistent across the capital city house markets, but was also evident in regional rent markets.”

However, she said cost of living pressures were causing some renters to re-think household arrangements.

“As noted in previous quarters, part of the explanation for an uptick in house rent growth may be in part due to households re-grouping into share houses,” Ms Owen said. “Additionally, the premium of house rents over units has narrowed in the past two years, from $63 per week at the median level to $38.

“This ‘catch up’ in unit rents could be making them less appealing, diverting tenants back to houses.”

The Reserve Bank had little choice but to raise interest rates again this week.

Inflation was already proving stubborn before the latest Middle East instability added further pressure to energy prices and supply chains.

Housing inflation alone has averaged six per cent over the past year, remaining one of the single biggest contributors to CPI.

But while the focus remains on rates, the deeper problem is structural and far more dangerous.

Australia is not building enough homes, and the conditions required to fix that are deteriorating simultaneously.

Construction costs remain elevated. Builders are increasingly unwilling to absorb contract risk. Labour shortages persist.

Capital is becoming more expensive. And as borrowing capacity weakens and sentiment softens, fewer projects are becoming financially viable.

The result is a self-reinforcing cycle.

The RBA raises rates to fight inflation. Higher rates reduce development feasibility. Fewer projects start. Housing supply tightens further. Rents rise. Inflation persists. The RBA raises rates again.

The only long-term solution is supply, yet Australia remains nowhere near the National Housing Accord target of 240,000 new dwellings a year.

Completion continues to lag approvals, meaning many projects approved on paper are simply never making it out of the ground.

That gap matters enormously because housing is not just another sector of the economy.

Around two-thirds of Australian household wealth is tied to property, while the sector underpins millions of jobs and related industries. Weakness here quickly spreads beyond real estate.

We are already seeing signs of stress. Auction clearance rates in Sydney and Melbourne have softened, borrowing capacity has declined, and parts of the market are experiencing price corrections as confidence weakens.

At the same time, policymakers continue to debate tax measures such as changes to negative gearing and capital gains tax discounts, despite fears that such reforms could drive private capital out of the rental market at precisely the moment when supply is most constrained.

This is the paradox at the centre of Australia’s housing crisis.

Demand for property remains extraordinarily high, yet the economic conditions required to actually build new housing are worsening.

The Reserve Bank cannot solve that problem alone.

Monetary policy cannot accelerate planning approvals, reduce construction costs or create more tradies. It can only raise the cost of money until something eventually breaks.

And increasingly, that “something” looks like the development pipeline itself.

Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.

Australian rents soar to record highs as housing crisis bites

The humble share house is back on the table as renters wrestle with rising rental costs

Rising rates, construction inflation and shrinking investor confidence are pushing Australia deeper into a dangerous housing spiral that monetary policy alone cannot fix.