Rental crisis? Average rents increase less than you think

You wouldn’t know from the pages of our newspapers, but the rate of growth in rents has been quite modest.

Not everywhere, not for everyone, but for most Australians who rent.

According to the most recent count used by the Bureau of Statistics to compile the consumer price index, rents increased just 1.6% in the year to June.

By comparison, wages rose 2.6%.

Higher increases in other prices pushed the general consumer price index up 6.1%.

Rent decreases during COVID mean that for the last five years the total increase has been only 1.5%.

Median rents are barely higher than they were at the start of COVID.

The Bureau gets its data directly from the computers of real estate agents, state housing authorities, and the Department of Defense (for Darwin).

It covers the rent actually paid, for a “matched sample” of dwellings, meaning that it refers to the same dwellings each quarter to record actual price changes.

Real versus advertised rents

Instead, the media (and some interest groups) prefer to focus on “advertised” or solicited rental data. These have been growing more strongly than the total mass of rents paid.

Nationally, advertised rents increased 8.2% in the year to June and nearly 18% over the five years to June according to CoreLogic data.

But the rents advertised are only a small fraction of the rents actually paid. Not all properties are advertised. Advertised rents do not always match the agreed rent. Most tenants remain on existing contracts.

Although advertised rents can be expected to relate to general rents over time, they are not necessarily representative of the entire market.

Our main concern should be what has happened to low-income renters.

Low increases for low income tenants

Australia’s lowest income renters receive rental assistance, which is quite frugal. Single renters get no more than $73 per week and very large families up to $97.

But the typical rent Australians pay with rental assistance hasn’t gone up much. During the year through June, the median rent for rental assistance recipients increased 1%, to about $5 per week. In the last five years it has increased by 9%, somewhat less than the increase in the consumer price index of 10.7%.

In the longer term, low-income rents have risen more steeply. Households in the bottom 40% of the income distribution used to spend about 22% of their after-tax income on rent, and now spend about 30%, below the 32% maximum.

If there is a rental crisis, the figures suggest that it is not widespread.

Rents in places like Perth and Darwin are rising much more than others as they emerge from long periods of negative rent growth.

Read more: Renters spend 10 times more on housing than on gasoline. Where is your relief?

The growth in demanded rentals is most pronounced outside cities, particularly in holiday and tree-turning destinations such as Richmond-Tweed (including Byron Bay), the Gold Coast, the Sunshine Coast and Wide Bay.

Some were experiencing strong growth in asking for rentals before COVID, which was accelerated through COVID.

Other regions, including parts of Sydney and Melbourne, have seen moderate or negative growth.

In all of the rental households, we haven’t seen any serious growth yet. To date, the “rental crisis” has been felt primarily in a few specific locations and among people looking for new rental properties.

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