Rental price growth is coming off the boil, but rents keep going up.
The rental market remains incredibly tight.
After exploding during Covid, rental inflation has started to return to more normal levels recently, but rental prices are still going up.
It’s worth noting here that this is a global phenomenon. The Economist magazine noted that across the rich developed world, rental inflation is at record highs:
Rich-world rents are growing at an annual pace of 5% or so, the fastest sustained increase in decades—presenting a huge challenge for the quarter of rich-world households that rent.
In some places, rental markets have gone truly bananas. French rental inflation is 2.5% year on year—not much at first glance, but a world away from the 0.3%-a-year rate before the pandemic. Australian rental inflation is eight times higher than in the late 2010s. In Portugal rents are rising by 7% a year.
So we’re not alone in the rental crisis boat, not that that will be much comfort to renters.
There just aren’t enough homes.
SQM reckon the vacancy rate ticked up a little in February, but at 1.3%, there is precious little stock available on the market.
And in some cities, the vacancy rate is still well below 1%. That’s incredibly tight.
SQM’s Louis Christopher reckons the rental crisis remains in full effect:
“National rental vacancy rates rose somewhat in February… But I don’t regard that as a material increase. I would not be surprised to see vacancy rates fall again in March which typically records the stronger rental demand”.
“Advertised rents continued to rise over the month for the capital cities, but not at the extreme pace that was recorded over 2021 to 2023. This suggests there has been an easing in rental growth expectations by landlords but nevertheless advertised rents are still rising faster than the overall inflation rate”.
“Overall, the data we have released today still suggests the country remains in a rental crisis, driven by a combination of excess population growth and multi-year lows in dwelling completions”.
And on the street, it’s still a blood bath. The Real Property Report 2025 found that many renters are having to offer above market prices to secure a home:
New research has revealed many renters are offering more money than what’s advertised to push their application to the top of the pile.
The Real Property Report 2025 found one in seven Aussies have added an extra $125 per week or more in the hope that that will get them across the line.
Melbourne renter Drew Baker told Yahoo Finance that it felt impossible to get a place without offering more money.
“We had quite strict budgets that we established ourselves, but that went up massively…it was incredibly frustrating,” he said.
I feel for you Drew. Everyone deserves a roof over their heads. But to be honest, if three blokes with meth-mullets rocked up to inspect one of my properties, they’d struggle to make it to the top of the short-list too.
But the broader point here is that rental prices will continue to grow ahead of inflation, and will probably hold at their current pace of 5-6% for the foreseeable future.
There just aren’t enough homes.
DB