Australian renters in several major city precincts are facing another wave of steep increases, with five markets projected to see rents climb by as much as 30% over the next four years. New forecasts from CBRE’s Apartment Rent and Vacancy Outlook, which tracks 53 precincts across the country’s capital cities, point to continued pressure on tenants despite some moderation in demand.
Where the steepest increases are expected
Median rents for two-bedroom apartments in these tracked precincts are expected to rise by about $120 per week, a 26% jump between 2023 and 2028. The five markets tipped for the highest growth of 30% or more are Sydney’s Eastern Suburbs, Parramatta, Melbourne North, Perth City, and most of Brisbane’s precincts.
CBRE’s Pacific Head of Research, Sameer Chopra, noted that the rental market has shifted dramatically over the past decade. “At the start of 2013 just four precincts in Australia had an average rent of over $600/week for two-bedroom apartments, being the Sydney and Perth CBDs, Sydney’s Eastern Suburbs and Sydney’s Lower North Shore,” he said. “By June this had grown to 20 precincts and by 2028 we expect 38 precincts – or over 70% of Australia’s two-bedroom apartments – to have a rent exceeding $600/week.”
Related: Bracks: Sunshine can rival Parramatta for Melbourne
The tightening vacancy picture is doing much of the heavy lifting. Vacancy rates across the 53 precincts are forecast to drop from the current average of 1.8% to just 0.8%, a figure that sits at around one-third of the average seen over the previous decade. Chopra said vacancy rates typically need to be around 4% to 5% for a market to be considered balanced.
To keep vacancy rates from falling further, Australia would need to deliver roughly 75,000 new apartments each year to keep pace with population growth. But supply is not keeping up. CBRE forecasts new stock will land at about 60,000 units in 2024 and again in 2027, a level roughly 40% below the previous peak in 2017 and near decade lows.
For renters, the practical effect of this shortfall is fairly straightforward: landlords hold the leverage, and tenants have fewer options when leases come up for renewal. Even with strong wage growth in some sectors, the gap between incomes and asking rents is likely to widen in these high-growth precincts, particularly for younger households and essential workers who rely on inner-city access.
Digging into the city-level numbers, Sydney’s apartment delivery is expected to average 14,000 per year over 2024-28, well below the 33,000 per year needed to meet housing demand. The city’s vacancy rate is set to fall from 2.2% to 0.8%, with average rent growth of 6% per year through 2028.
Related: Knightsbridge’s Luxe Love: Lab Created Rings for Opulent Unions
Melbourne’s delivery pipeline is thinner still, averaging 10,000 apartments per year over the same period, nearly 40% below Sydney. Demand for housing stock, including apartments and communities, is likely to average 38,000 per year over the next five years, pushing the city-wide vacancy rate down from 1.7% to 0.9%. Brisbane, meanwhile, is forecast to deliver about 6,500 apartments per year, against demand of 16,500 per year, with vacancy tightening from 1.1% to 0.8%.
Renting remains cheaper than buying, for now
Despite the grim outlook for tenants, Chopra said renting should still be more affordable than buying in most of Australia’s major cities. “Australia’s monthly apartments rents are currently 30% cheaper than purchasing at current prices across most precincts,” he said. “The reversion of interest rates to say 2%-2.5% could see this relative rental affordability remain as capital values rise.”
That relative affordability could narrow, however, if interest rates drop and buyer demand returns. For now, the forecast points to a market where rents keep climbing, supply stays tight, and the balance of power remains firmly with property owners.
