Regional rent growth is nearly three times that of cities

• Rents have surged 9.6 per cent in Australia’s regional towns as demand outstrips supply
• CoreLogic released its Quarterly Regional Report which found rents increased almost three times as much as capital city markets over the year, which grew 3.3 per cent
• Supply is playing a major contributing factor in the rise, as a tightening market puts upward price pressure on the rental market
• Demand also means the average time a rental property is on the market has declined from 25 days pre-COVID to just 17 days in April 2021
• CoreLogic head of research Australia Eliza Owen says one of the conditions putting upward pressure on rentals is a lack of movement out of the regions and an increase of movement to the regions.

Rents have surged 9.6 per cent in Australia’s regional towns as demand outstrips supply.

CoreLogic released its Quarterly Regional Report which found rents increased almost three times as much as capital city markets over the year, which grew 3.3 per cent.

Supply is playing a major contributing factor in the rise, as a tightening market puts upward price pressure on the rental market.

“Of the 25 regions analysed, total available rent listings have, on average, halved over the year,” CoreLogic head of research Australia Eliza Owen said.

“According to the CoreLogic hedonic rental index for these regions, rent values have increased 9.4 per cent on average. This ranges from a 17.6 per cent uplift across the Richmond-Tweed area, to a 2.3 per cent increase across the Capital Region.”

Demand also means the average time a rental property is on the market has declined from 25 days pre-COVID to just 17 days in April 2021.

On the Gold Coast, for example, the median length of time a rental is on the market is two weeks, while the region has the lowest average days on sale in the rolling quarter.

“The data suggests that tenants are having to compete harder for rental accommodation in major regional centres, both in terms of their wallet, and the pace of their decision making,” Owen said.

“More severe consequences of the recent tightening in rental markets include housing stress and homelessness.”

Owen said one of the conditions putting upward pressure on rentals is a lack of movement out of the regions and an increase of movement to the regions.

Australian Bureau of Statistics data shows that in the 2020 calendar year, migration away from regional Australia to capital cities fell to 190,151. By contrast, a net 43,000 Australians moved to regional areas from capital cities in 2020.

This was the largest net inflow to the regions since the beginning of the series in 2001.

“Regional relocation from cities to regions may also be increasingly skewed to higher income workers, which would put further upward pressure on purchase and rent prices,” Owen said.

“This is because remote work tends to be concentrated in the ‘knowledge economy’, such as for professionals, as well as clerical and administrative workers.”

Owen said another factor was eased restrictions boosting domestic tourism, which can contribute to more long-term rentals converting to short-stay accommodations.

Creating more affordable housing in both regional Australia and major cities could ease rental conditions, according to Owen.

“Having well dispersed affordable housing options can also serve to restrict internal migration based on affordability constraints,” she said.

“The challenge with supply-side solutions is that they are relatively inelastic in responding to very tight rental markets, especially in regional markets where the pool of labour and materials is often shallower relative to the capitals.

“But in an environment where government schemes have brought forward demand for private housing, social and affordable housing may also be an important source of activity for the housing construction sector.”