4-year forecast projects 28% rise in apartment rents
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Australia’s major cities are tipped to see huge rental growth in high-density dwellings.
According to CBRE’s Apartment Vacancy and Rent Outlook, the median weekly rent for a two-bedroom apartment is expected to grow by $155, or 28 per cent, between 2024 and 2028 across the city markets of Sydney, Melbourne, Brisbane, Perth, Adelaide, Canberra and the Gold Coast.
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CBRE’s Pacific head of research, Sameer Chopra, noted just how rapidly rents have been increasing in the apartment market in recent years.
“In 2013, just four precincts in Australia had an average rent of over $600 per week for two-bedroom apartments, those being the Sydney and Perth CBDs, Sydney’s Eastern Suburbs and Sydney’s Lower North Shore,” he commented.
“By June 2023, this had grown to 20 precincts and by 2028 we expect 41 precincts – or over 75 per cent of Australia’s two-bedroom apartments – to have a rent exceeding $600 per week,” Chopra revealed.
Contributing to the firm’s growth forecasts is that some of the potential apartment supply that CBRE counted in earlier reports has since been lost, contributing to a 9 per cent reduction in potential supply between 2023 and 2028.
It’s more bad news for capital city vacancy rates, which are projected to fall to 0.8 per cent by 2028 from 1.8 per cent in 2023, representing a third of the previous decade’s average, which hovers just under healthy territory at 2.5 per cent.
“A balanced market for apartment rentals would typically see vacancy around 4 per cent to 5 per cent. We estimate an incremental 90,000 apartments are needed, over and above the current absorption rate of circa 170,000–200,000 houses and apartments per annum,” Chopra noted.
The markets expected to experience the sharpest falls in vacancy are inner-city Sydney suburbs in the east, west and lower north shore. Similar contraction is expected in Melbourne’s inner east and south-east suburbs, Brisbane’s south-east north Canberra and the northern Gold Coast.
Where the vacancy rate sits below 1 per cent, such as in large areas of Adelaide, Melbourne and Perth, CBRE forecasts a smaller yet continual reduction in available properties.
As buying continues to be a tough prospect for many Australian residents, Chopra noted that attention will concentrate on less expensive rental options.
“Monthly rent payments are currently 22 per cent cheaper than alternate buy options across most precincts in Australian capital cities. We don’t think this is just because of higher mortgage rates, given that monthly rental costs were 30 per cent lower than monthly mortgage repayments in 2018 and in December of that year the RBA’s cash rate was 1.5 per cent compared to 4.35 per cent in December 2023.”
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