Rent and Cost of Living Trends in Australia

Yao Xu s3300083

Last updated: 30 October, 2024

Introduction

Australia’s rental market has faced a dramatic rise in prices, with rent increasing by 6.8% over the past year. This reflects a persistently tight rental market, characterised by high demand and limited supply. Capital cities, where the rental vacancy rate remains exceptionally low, continue to see intensified rental pressures and make it difficult for many to find affordable housing.

Factors contributing to this trend include sustained population growth in urban centres, a shift in housing preferences and the economic impacts of the COVID-19 pandemic. In addition to natural population increases, migration has rebounded post-pandemic, which intensifies competition for housing and pushes rent higher. Combined with inflationary pressures across essential goods, these factors create a challenging environment for renters.

The data used in this analysis includes (all data sourced from the Australian Bureau of Statistics, ABS):

All groups CPI with Australian rent movement

This graph compares the all groups Consumer Price Index (CPI) with Australian rent movement. As both lines follow a similar trajectory, the strong correlation indicates that rent prices are heavily impacted by broader economic pressures, including inflation across other essential goods and services.

Rent Price Indices - Capital vs. Regional Areas

Below graph highlights how rental inflation has evolved differently in regional areas versus capital cities over the past few years. In 2019, annual inflation for private rental properties in regional areas slightly exceeded that in capital cities. However, since the onset of the COVID-19 pandemic, rental inflation trends have diverged significantly, with demand shifting away from densely populated urban centers.

Annual Rent Inflation - Capital vs. Regional Areas

This graph provides insight into the rental price volatility in capital cities compared to regional areas. Capital city rents, influenced by inflation and COVID-19 impacts, have shown much greater fluctuation than regional rents, which remained relatively stable or even increased in response to low vacancy rates and positive net migration flows. This trend reveals the different dynamics shaping rental inflation in urban versus regional areas.

Rent vs. New Dwellings Changes

This section examines the relationship between rental price increases and new dwelling purchase changes, which includes both new builds and major renovations. Over the past year, the cost of new dwellings rose by 5.1%, largely due to higher labor and material costs passed on to consumers by builders. This rise in dwelling prices impacts the rental market indirectly by limiting housing affordability.

Comparing Rent to Broader CPI

This chart displays the primary contributors to the quarterly CPI change across various sectors. Housing plays a significant role as one of the most impactful contributors, with a quarterly movement of 1.1%. Notably, ‘Housing’ in the CPI includes rent, new dwelling purchases by owner-occupiers, electricity, gas, and other household fuels.

Map View of Capital City Rents

This interactive map visualises rent changes in Australia’s eight capital cities. This provides a comparative view of quarterly and annual changes. Each city shows the percentage change in rent from the previous quarter, along with the annual change and the index number for the CPI as of June 2024.The map illustrates the geographic diversity of the rental market and reveals which cities experience the sharpest rent increases.

References