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Rental demand hits record high, what does this mean for renters and landlords?

By George Hadgelias
  1. City life is recovering, international travel has resumed and many people are returning to capital cities – all drivers of rental demand. At the same time, demand for rentals in regional hubs remains strong.

    The imbalance between the supply of rentals and demand has become more pronounced in the past few months in our capital cities and continues to be an issue in regional areas.

There are several key reasons for this.

First is the reopening of domestic and international borders. With travel again possible, short-term holiday rentals that were converted into long-term rentals during the pandemic are likely to be withdrawn. This is contributing to a shortage in the traditional rental supply.

The return of international students is also expected to drive up rental demand and exacerabete the shortage in inner-city suburbs.

The second is that rental demand in the regions is unwavering. With remote working now widely adopted, many Australians are still looking to relocate to areas that offer nature-rich or seaside lifestyles. This has continued to put pressure on rentals in regional areas.

To get a sense of just how much demand has increased we looked at the number of days it took a rental property to be leased after it was listed on realestate.com.au.

In February, the average days on site for a rental in Sydney was the shortest it’s been since March 2017. On average, it took 22 days for a house or unit on realestate.com.au to be rented out last month.

Melbourne also showed a similar trend with rentals, on average, being leased 24 days after they were listed. This is the quickest pace since March 2020.

Rentals in Brisbane and Adelaide both had record average low days on site last month, at 16 days and 15 days respectively. Demand has been comparatively stronger in these capitals due to their affordability and lifestyle offerings.

In Regional New South Wales, Victoria and Queensland, days on site for a rental have remained near record lows over the past year, a result of the pandemic-induced inner-city exodus.

More insights from the expert team at PropTrack:

This rising disparity in rental supply and demand means different things for renters and landlords.

Renters will be more out of pocket and will face increased competition from other prospective tenants, while landlords can expect a higher return on their investment and will find it a lot easier to rent out their properties.

Longer term, relief for renters will likely come in the form of increased supply, as more investors enter the market – a trend we’re already seeing.

The value of new loans to investors has increased even further in 2022 and, as more investor purchases transact, renters may find themselves with a bit more choice and a bit less competition.

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