Sydney to Overtake Canberra as Most Expensive Rental Market in Australia

A general view from the suburb of Earlwood is seen in Sydney, Australia, on Sept. 6, 2022. Lisa Maree Williams/Getty Images

Sydney is on its path to replacing Canberra as the most expensive city for renters in Australia due to an increase in demand for rental properties as migration is picking up.

According to the real estate data provider CoreLogic, Canberra was the only capital city to see a drop in rents in the September quarter, with prices dipping by 0.4 percent.

In contrast, Sydney reported a growth of 2.9 percent during the quarter.

Kaytlin Ezzy, an economist at CoreLogic, said the price difference between the two most expensive rental markets was diminishing and now stood at $17 (US$10.70) per week.

“Given international migration is expected to continue to support rental demand across Sydney while affordability is expected to hamper Canberra’s rental growth, it’s likely that we'll see Sydney overtake Canberra as Australia’s most expensive capital city rental market in the coming months,” Ezzy said.

A billboard advertises a new home for sale in Melbourne, Australia, on Sept. 6, 2022. William West/AFP via Getty Images

Meanwhile, the third quarter rental review by CoreLogic showed that rental growth was starting to slow down as renters were reaching the limit of their budget.

While asking rents jumped by a record 10 percent in 12 months to September, prices only grew by 0.6 percent in the month and 2.3 percent over the quarter.

“The slowdown in the rate of rental growth may suggest an increasing number of prospective tenants are starting to come up against affordability constraints,” Ezzy said.

“As high non-discretionary inflation, along with increasing rents, put additional stress on a renter’s balance sheet, it is likely that a growing number of tenants look to reform larger households or find more affordable rental options in an attempt to reduce costs.”

Despite the recent drop, Canberra’s average rental prices still remained at the top, standing at $682 per week, followed by Sydney at $665 per week, Darwin at $590 per week and Brisbane at $573 per week.

On the other hand, Melbourne continued to be the most affordable capital city for renters at $495 per week, followed by Adelaide at $508 per week, Perth at $533 per week and Hobart at $551 per week.

Record Low Vacancy Rates

Meanwhile, the rental market remains highly competitive, with national vacancy rates dropping to 1.1 percent in September, the lowest level ever recorded.

At the same time, the total supply of advertised rental properties fell 35.4 per cent below the previous five-year average.

Ezzy said the situation was partly caused by a lack of investments in the market between 2017 and 2020.

In addition, she said many investors sold their properties to cash in on massive capital gains during the recent property upswing.

However, as house prices were dropping and surging rents had driven gross rental yields up to 3.57 percent, Ezzy said some investors might return to the market.

“Once interest rates have stabilised, higher yields coupled with lower values and stronger buying conditions could entice more investors to enter the market, which would ultimately help raise rental supply,” she said.