As we are all entering 2023, I am sure we are all wondering what is going to happen with the Australian rental property market for this year and beyond that.

After December’s spike in prices, two of the most populous cities, Sydney and Melbourne are facing yet another big increase in their weekly rental prices notwithstanding the new January figures which reveal that rental prices have stalled in every other city across Australia.

In Melbourne, the weekly rental cost for all dwellings increased by 2.3 per cent to $450 in November and December only – meaning, a 9.8 percent change in prices since the beginning of 2022.

Even now, based on January’s rental market reports, the gap between a house and median unit in Melbourne is quite tight as rental prices for the more affordable houses continues to increase demanding surges in between the costs of living and the return of migration.

Tight Rental Market in Australia’s Capital Cities

It is safe to say that prior to the pandemic, the two capital cities, Sydney and Melbourne welcomed two thirds of the overseas migration. This has contributed a large portion for the annual rental market growth throughout the year figuring Melbourne with 14.2% and 15.5% across Sydney.

Looking from 2021 onwards, there is a 7.7 percent increase in the rental property prices on a national level where we have Melbourne with an average price of $480 per week, while a unit in Sydney is figuring $560 a week rent which is $100 less per week than renting a house. Hence, in order to save on costs, people are moving out of houses and into units, which allows them to save significant costs on their rents.

Having said that, most people who migrate they choose Sydney or Melbourne which adds to the overall competition of the rental stock on the market. Supply is still low in these two cities and inquiry is quite high with properties leasing as soon as they hit the market.
Based on the new reports from Prop Track, the demand for rental properties has increased in the capital cities figuring enquiries per listing of up to 31.2 per cent. However, while the demand grows, the supply of available rental properties remains significantly low leaving Sydney and Melbourne with the biggest decline in the

number of properties available for rent and with quite big increase in enquiries on a per-listing basis.

While the prices are skyrocketing in Melbourne and Sydney, we have a stall in the rental property prices in Brisbane, Adelaide, Hobart and Darwin after months on consistent rises in 2022. Brisbane and Adelaide had a consistent increase in prices towards the end of 2022 with a rise of 11.4 per cent and 11.8 per cent respectively. Renting a dwelling in Brisbane will set you back by $490 per week, while Adelaide residents can expect to fork out an average of $450 per week.

Canberra and Perth both saw prices go backwards, with rents falling by 0.8 per cent and 3.2 per cent respectively.

In regional NSW, there has been no change to the cost of dwellings through the December quarter and a fall of 3.8 per cent for houses with the median rent for a home now $500 per week – a major contrast to Sydney.Regional Victoria, South Australia and Western Australia all saw the cost of renting a dwelling remain the same, while Queensland, Tasmania and Northern Territory have seen prices go backwards.

Having said that, the latest reports show that the internal migration in Australia is increasing towards Sydney and Melbourne, where we can expect tighter rental market compared to other cities in Australia.

Despite everything, Melbourne remains one of Australia’s most affordable cities if we are looking at the rental property market prices. The rental price at the moment for a median unit in Melbourne at the moment is around $500 per week, followed by Adelaide where the price is $518 per week. Hobart stays at around $552 per week, Perth is $553 per week rent for a median unit and Brisbane holds the highest rental price which now is around $588 per week.

Rental market unclear for 2023

Despite all the figures and reports in January 2023, the rental market outlook is quite well mixed and unclear as we have high internal migration in one of the most populous Australian cities, Melbourne.

As an addition to this, we also have increased number of people that are returning from overseas and this overseas migration will only add to the already risen demand on Melbourne’s rental property market. As for which part of Melbourne is most highly to have tight rental market, the reports placed Inner Melbourne, the South-East of Melbourne as well as Melbourne’s Western Suburbs.