New Insights into the Rental Market
Fred Hanmer and Michelle Marquardt
[*]
Photo: Daria Nipot – Getty Images
Abstract
This article draws out new insights into the private Australian rental market using a new large
administrative dataset of rental properties, which is an input to the Consumer Price Index (CPI).
CPI rent inflation has picked up recently. Since 2021, rents have increased across inner-city and
regional areas throughout all the states. Rent increases have also become more common and
larger on average – particularly for the 2–3 per cent of properties each month that have a change
in tenants. This is in contrast with the experience during the COVID-19 pandemic where rents fell
in many suburbs close to central business districts but increased in regional areas, driven by a
preference shift among many households for more space and net population flows.
Introduction
Access to appropriate and affordable rental
accommodation is important for the wellbeing of
renter households. According to the 2021 Census,
close to 30 per cent of all households rent their
home in the private rental market – a share that has
risen over the past few decades. The
2019/20 Survey of Income and Housing (SIH)
showed that renters tend to have lower incomes
and spend a larger share of their disposable income
on housing costs compared with owner-occupier
households (both outright owners and those with a
mortgage). The median private renter spends
around 26 per cent of their weekly income on rent.
Furthermore, rents (both public and private)
currently make up around 6 per cent of the CPI
basket, making it the second largest expenditure
class.
[1]
Understanding the rental market is
important for policymakers as it has implications for
patterns of consumption and savings by
households, as well as inflation.
The rental market has tightened since late 2021,
with vacancy rates declining over this period
(Graph 1). During the COVID-19 pandemic,
lockdowns and health concerns prompted many
Australians to desire more space and to live with
BULLETIN – JUNE 2023 1
fewer people (Ellis 2022). The associated decline in
average household size is estimated to have
contributed to around 120,000 additional
households being formed, with some of this
demand materialising in the rental market (Agarwal,
Gao and Garner 2023). More recently, the return of
international migration – and, in particular, the
return of international students – has added to
demand for rental properties in the major cities.
Advertised rents have grown strongly and finding a
suitable rental property has become more difficult
as vacancy rates have declined.
Rents, as measured in the CPI, have also picked up
of late but to a lesser extent than advertised rents,
increasing by around 5 per cent over the year to
February 2023 (Graph 2). Advertised rents measure
the asking price for currently vacant properties; CPI
rents measure price changes for the stock of all
rentals.
[2]
The new rents dataset
As outlined in a recent ABS information paper, from
July 2022 the ABS has incorporated a new data
source to measure the rents series in the quarterly
CPI and monthly CPI indicator (ABS 2022a).
The new dataset is comprised of information about
rental properties as entered by property
managers.
[3]
The dataset begins in July 2018, is
updated monthly and currently includes
approximately 600,000 rental properties across both
regional and capital city areas. In total, this
Graph 1
2019201520112007 2023
0
2
4
6
8
%
0
2
4
6
8
%
Rental Vacancy Rates*
Seasonally adjusted
Brisbane
Perth
Melbourne
Sydney
*
Data is monthly for Sydney and Melbourne and quarterly for all
other series.
Sources: REIA; REINSW; REIV
represents 32 per cent of the national 2021 Census
rental dwelling stock.
The dataset contains several variables of interest,
including: weekly rent; property characteristics, such
as type (apartment, townhouse or house), street
name and postcode, and number of bedrooms;
lease start and end dates; and a unique property ID.
The dataset only includes private rental properties.
As such, the results shown throughout the rest of
the article reflect outcomes for the private rental
market and exclude rental assistance. By contrast,
the measure of rents in the CPI includes prices for
both the public and private rental market and
accounts for rental assistance in the private rental
market.
[4]
Rental market characteristics
Median rents began increasing in all states in
2021 and have continued to increase over the past
year. In February 2023, the median weekly rent
amount was highest in the ACT at $560 per week
and lowest in South Australia at $380 per week
(Graph 3).
Around 90 per cent of lease agreements are for
12 months or less, with the bulk of these being
12-month leases (Graph 4). The share of six-month
leases has declined since early 2021 in favour of
12-month leases. These figures reflect the share of
currently valid leases and therefore understate the
typical length of tenancy because renters may enter
Graph 2
2019201520112007 2023
60
80
100
120
index
60
80
100
120
index
Rents*
June 2019 = 100
CPI rents
Advertised rents
*
With monthly data for CPI rents from September 2017; CPI rents are
not seasonally adjusted, and advertised rents are seasonally adjusted.
Sources: ABS; CoreLogic
NEW INSIGHTS INTO THE RENTAL MARKET
2 RESERVE BANK OF AUSTRALIA
into a new lease agreement or a rolling month-to-
month arrangement after their lease expires.
Around 2–3 per cent of properties each month
have a change in tenant (Graph 5). This turnover is
similar across the states and has been broadly stable
over the past four years or so. Quantifying the
proportion of properties that have a change in
tenant is useful as it helps to explain the large
divergence between advertised rents and CPI rents.
As discussed above, advertised rents have grown
strongly of late; however, as they represent only a
small proportion of the rental market, this has had a
limited impact on the measure of rents included in
the CPI.
Regional versus capital city rents
Rental properties in regional areas make up over
one-quarter of all rental properties, and 10 per cent
Graph 3
20222021202020192018 2023
200
300
400
500
$/wk
200
300
400
500
$/wk
Median Weekly Rent
ACT
NSW
NT
Qld
SA
Tas
Vic
WA
Source: ABS
Graph 4
20222021202020192018 2023
0
20
40
60
%
0
20
40
60
%
Share of Leases by Length
12 months
6 months
6–12 months
<6 months
>12 months
*
Lease length is rounded to the nearest number of months. Includes
only leases that are valid in the current month and excludes periodic
leases with no end date (e.g. rolling month-to-month).
Source: ABS
of all households rent their home in a regional area.
The new dataset covers regional areas as well as
capital cities, providing a rich source of information
about rent inflation geographically since 2018. This
allows for an exploration of rent price measurement
for both finer levels of geographical detail and a
broader geographical scope than the CPI, which
covers only the eight capital cities.
Developments in population flows, vacancy rates
and changes in households’ preferences over the
past three years have been important drivers of
rents. Early in the COVID-19 pandemic, demand for
rental properties in inner-city markets declined as
international students returned home, international
migration slowed and some young adults moved
back in with their parents. As well as overseas
migration coming to an effective halt, people from
parts of Australia that were not in lockdown at the
time, including regional areas and smaller capital
cities, tended not to move to cities that were in
lockdown (Ellis 2022). The decline in international
visitors and domestic business travel also
encouraged some landlords to offer their short-
term holiday rental accommodation on the long-
term market, increasing the available rental stock
(Evans, Rosewall and Wong 2020). Similarly,
lockdowns prompted people to desire more space
than densely populated inner-city areas could
provide (Agarwal, Bishop and Day 2023).
As a result, rent inflation diverged during the
pandemic across capital cities compared with
regional areas. In general, rents increased the most
Graph 5
20222021202020192018 2023
0
1
2
3
4
%
0
1
2
3
4
%
National Rental Market Turnover
Share of occupied properties with a change in tenant
Source: ABS
NEW INSIGHTS INTO THE RENTAL MARKET
BULLETIN – JUNE 2023 3
in regional areas that are furthest away from a
capital city, supported by net population inflows
and low vacancy rates (Graph 6).
By contrast, rents decreased in some capital cities
over the pandemic period, in part reflecting
elevated supply of rental properties and weak
demand because of travel restrictions and lower
population growth. State governments also
introduced mechanisms to enable tenants who
became unemployed or lost income due to
COVID-19 to negotiate rent reductions. Rent
declines were largest in inner-city Sydney and
Melbourne where renegotiations were most
prevalent and where international travel restrictions
led to the most pronounced increase in available
rental properties (Evans, Rosewall and Wong 2020).
More recently, rent inflation in capital cities and
regional areas has picked up; both increased by
around 6 per cent over the year to February 2023
(Graph 7). This is above the 4.8 per cent rent
inflation published in the monthly CPI indicator for
this period as the CPI also includes public rental
dwellings and rental assistance properties.
Rents in many inner-city areas remain below pre-
pandemic levels
Although rents for properties that are close to a
central business district (CBD) (less than 12.5 km)
began to increase in 2021, rents for many inner-city
suburbs in Melbourne and Sydney are still below
pre-pandemic levels. In fact, 20 per cent of the
2021 Census capital city rental dwelling stock have
rents below pre-pandemic levels, while 20 per cent
have experienced rent increases of at least
Graph 6
2022202120202019 2023
-5.0
-2.5
0.0
2.5
5.0
%
-5.0
-2.5
0.0
2.5
5.0
%
Year-ended Rent Inflation
By SA3 distance to CBD*
>1000 km
500–1000 km
200–500 km
100–200 km
75–100 km
50–75 km
25–50 km
12.5–25 km
<12.5 km
*
Total private dwellings, excluding rent assistance. Stratified by
SA3 and property type.
Source: ABS
10 per cent since March 2020 (Graph 8; Graph 9;
Table 1; Table 2). Rent prices fell further and were
slower to start increasing in Sydney and Melbourne
compared with the other capital cities over
2020 and 2021. This was driven by the factors
mentioned above, including a higher prevalence of
rent reductions, higher vacancy rates and larger
declines in net internal and overseas migration.
Nonetheless, the rental market has tightened
significantly in inner-city areas over the past year,
particularly for new tenancies that have
experienced large rent increases.
Graph 7
2022202120202019 2023
-4
-2
0
2
4
6
%
-4
-2
0
2
4
6
%
Year-ended Rent Inflation*
Capital cities
Regional areas
*
Total private dwellings, excluding rent assistance. Stratified by
SA3 and property type.
Source: ABS
Graph 8
Rent Price Indices*
By capital city SA3, March 2020 = 100
Greater Sydney
2020 2023
80
85
90
95
100
105
110
index
Greater Melbourne
2020 2023
80
85
90
95
100
105
110
index
0 20 40 60 80
Distance to CBD (km)
*
Total private dwellings, excluding rent assistance. Stratified by
SA3 and property type.
Source: ABS
NEW INSIGHTS INTO THE RENTAL MARKET
4 RESERVE BANK OF AUSTRALIA
Table 1: Rent Prices Below Pre-pandemic Levels
(a)
Expenditure share of rental dwelling stock with rent prices below pre-pandemic levels
Per cent
SA3 distance to
CBD Sydney Melbourne All other capital cities Total 8 capital cities
<12.5 km 49 62 0 36
12.5–25 km 10 17 0 9
>25 km 0 0 0 0
(a) To calculate these proportions, price indexes were created using rents for each SA3 by property type (e.g. houses, apartments and townhouses).
Then, the proportion of rent expenditure for each SA3 by property type that index represented of total expenditure for the particular radius around
the CBD was calculated. These proportions were then aggregated for those indexes below March 2020 levels in February 2023, to give the overall
expenditure share of the rental dwelling stock with rent prices below pre-pandemic levels.
Table 2: Rent Prices At Least 10 Per Cent Above Pre-pandemic Levels
Expenditure share of rental dwelling stock with rent prices at least 10 per cent above pre-
pandemic levels
Per cent
SA3 distance to
CBD Sydney Melbourne All other capital cities Total 8 capital cities
<12.5 km 0 0 45 15
12.5–25 km 0 0 71 24
>25 km 2 6 87 26
A closer look at the distribution of
rent changes
Rent increases have become larger and more
common over the past year for most properties in
capital cities. This is the case regardless of whether
properties have a new tenant or not, although
increases have been more pronounced for
properties with a new tenant. Over the past year,
rents have increased for almost three-quarters of
Graph 9
Share of Rents at or Below Pre-Pandemic Levels
By SA3 Distance to CBD*
Sydney
25
50
75
100
%
25
50
75
100
%
<12.5 km
>25km
12.5–25km
Melbourne
25
50
75
100
%
25
50
75
100
%
All other capitals
M M M MJ J JS S SD D D
2021 20222020 2023
0
25
50
75
100
%
0
25
50
75
100
%
*
Total private dwellings, excluding rent assistance. Stratified by
SA3 and property type.
Source: ABS
properties, up from around one-quarter every year
pre-pandemic. Rental prices for properties with new
tenants are more likely to change than for
properties with existing tenants. Over mid-to-late
2020, new tenants tended to pay rental prices lower
than or equal to what was being paid for a given
rental property the year prior (Graph 10). However,
since mid-2021, the majority of new tenants have
been paying higher rent than was charged for the
same property the year prior. This share increased to
as high as 94 per cent in February 2023, compared
with 71 per cent for properties with existing tenants
(Graph 11).
The distribution of rent changes has shifted, with
larger rent increases becoming more common for
all properties regardless of whether tenants are new
or existing. However, rent increases for properties
with a new tenant have tended to be larger, on
average, than for properties with existing tenants. In
February 2023, over 60 per cent of properties with
new tenants had rent amounts more than
10 per cent higher than 12 months earlier
(Graph 12); this compares with only one-quarter of
properties with existing tenants having rent
increases of more than 10 per cent (Graph 13).
NEW INSIGHTS INTO THE RENTAL MARKET
BULLETIN – JUNE 2023 5
Rents have increased at a faster pace for more
expensive rental properties than for less expensive
properties over the past year. Properties in the 90th
percentile for weekly rent – that is, those properties
Graph 10
2022202120202019 2023
0
20
40
60
80
%
0
20
40
60
80
%
Year-ended Rent Changes – New Tenants
Share of properties*
Fall
No change
Rise
*
Expenditure weighted. Private rentals only excluding rent assistance.
Source: ABS
Graph 11
2022202120202019 2023
0
20
40
60
%
0
20
40
60
%
Year-ended Rent Changes – Existing Tenants
Share of properties*
Fall
No change
Rise
*
Expenditure weighted. Private rentals only excluding rent assistance.
Source: ABS
Graph 12
2022202120202019 2023
0
20
40
60
80
%
0
20
40
60
80
%
Rent Changes of Different Sizes – New Tenants
Year-ended; share of properties*
>10%
7.5–10%
5–7.5%
2.5–5%
>0–2.5%
No change
<0%
*
Expenditure weighted. Includes private rentals only. It should be noted
the distribution presented in this graph uses different methodology
and sampling to the CPI.
Source: ABS
with weekly rent amounts greater than or equal to
90 per cent of all properties – have experienced
rent increases of 10 per cent on average over the
year to February 2023 (Graph 14). By contrast,
properties in the 10th percentile – or those
properties with weekly rent amounts less than or
equal to 90 per cent of all properties – have
increased by 7 per cent on average.
While an increase in rents puts pressure on
household budgets across the economy, lower
income households typically have the most
constrained budgets as they spend a greater
proportion of their income on essential items and
have lower financial buffers. For example, all else
equal, a 7 per cent increase in rent for renters in the
10th percentile of the income distribution would
reduce the amount of income available for other
Graph 13
2022202120202019 2023
0
20
40
60
80
%
0
20
40
60
80
%
Rent Changes of
Different Sizes – Existing Tenants
Year-ended; share of properties*
>10%
7.5–10%
5–7.5%
2.5–5%
>0–2.5%
No change
<0%
*
Expenditure weighted. Includes private rentals only. It should be noted
the distribution presented in this graph uses different methodology
and sampling to the CPI.
Source: ABS
Graph 14
2022202120202019 2023
-5
0
5
%
-5
0
5
%
Average Rent Changes
Year-ended; by rent amount percentile*
10th
90th
Median
*
Ranks properties each month by the weekly rent amount percentile
and then calculates expenditure weighted average price change.
Source: ABS
NEW INSIGHTS INTO THE RENTAL MARKET
6 RESERVE BANK OF AUSTRALIA
uses more than a 10 per cent increase in rent would
for renters in the 90th percentile of the income
distribution.
Measuring rents paid by new tenants
The rents paid by new tenants provide a leading
indication of price developments in the total stock
of rental properties. Previously, the best available
indicator of rents paid by new tenants was
advertised rents; however, this may not be the most
useful measure because the actual rent agreed to
by a landlord and a new tenant may be different
from the advertised amount. To overcome this
concern, an index of actual prices paid by new
tenants can be estimated using the subset of
properties in the dataset each month that have a
new tenant.
[5]
Actual rents paid by new tenants increased by
14 per cent over the year to February 2023, which is
9 percentage points higher than the increase in the
monthly CPI indicator rent index (which measures
all rents, not just those paid by new tenants). Since
the onset of the pandemic in 2020, rents paid by
new tenants have increased by 24 per cent and the
CoreLogic advertised rent series has increased by
22 per cent (Graph 15). The index declined further
than the CoreLogic advertised rent series earlier in
the pandemic due to the actual rent agreed to
between landlords and tenants tending to be lower
than the advertised amount. More recently, rents
paid by new tenants have increased above the
CoreLogic advertised rent series because the actual
rent agreed between landlords and tenants has
been higher on average than the advertised
amount.
Rents for apartments with new tenants have been
more volatile than for houses and townhouses over
the past couple of years, in line with the develop-
ments in the rental market discussed above
(Graph 16). Rents for apartments with new tenants
fell sharply during the pandemic and remained
below pre-pandemic levels until early 2022, while
rent inflation for houses and townhouses with new
tenants has generally been positive since the onset
of the pandemic. Rent inflation for apartments with
new tenants was 24 per cent over the year to
February 2023, whereas the overall index increased
by 14 per cent. By contrast, rent inflation for houses
and townhouses with new tenants was around
10 per cent over the year to February 2023.
If vacancy rates remain low, then stronger-than-
normal increases in advertised rents are likely to
persist. This will impact the CPI both directly, given
that these properties are included in the
calculations, and indirectly as increases in market
rents influence landlords’ price-setting behaviour in
the rest of the rental market.
Conclusion
The rental market has tightened considerably since
2021. Rent inflation has picked up and is broadly
based across new and existing tenants, property
types and the states. Rent increases have also
Graph 15
20222021202020192018 2023
90
100
110
120
index
90
100
110
120
index
Measures of Rent Prices for New Tenants
February 2020 = 100
Advertised rents*
Actual rents paid by new tenants**
*
Listed asking rents for vacant rental properties.
**
Properties with a change in tenant. Darker line is 13-month
Henderson trend.
Sources: ABS; CoreLogic
Graph 16
20222021202020192018 2023
80
90
100
110
120
index
80
90
100
110
120
index
Rent Prices for New Tenants
Properties with a change in tenant; February 2020 = 100*
Houses
Townhouses
Apartments
*
Darker line is 13-month Henderson trend.
Source: ABS
NEW INSIGHTS INTO THE RENTAL MARKET
BULLETIN – JUNE 2023 7
become more common, and larger on average.
Properties with a change of tenant have
experienced larger rent increases than existing
tenancies, and so have been more closely aligned to
changes in advertised rents. The new dataset on
rental prices discussed here has enhanced the
measurement of rents in the CPI and afforded new
insights into the private rental market.
Endnotes
References
ABS (2021), ‘More than 40 per cent of Australians Worked from Home’, Media Release, 14 December.
ABS (2022a), ‘Introducing a monthly CPI indicator for Australia’, 16 August.
ABS (2022b), ‘Annual weight update of the CPI and Living Cost Indexes’, 20 December.
Ellis L (2022), ‘Housing in the Endemic Phase’, Keynote Speech to the UDIA 2022 National Congress, Sydney,
25 May.
Agarwal N, R Gao and M Garner (2023), ‘Renters, Rent Inflation and Renter Stress’, RBA Bulletin, March.
Agarwal N, J Bishop and I Day (2023), ‘A New Measure of Average Household Size’, RBA Bulletin, March.
Evans R, T Rosewall and A Wong (2020), ‘The Rental Market and COVID-19’, RBA Bulletin, September.
Fred Hanmer, the lead author of this article, is an
economist in the RBA’s Economic Analysis Department;
this work was completed while on secondment at the
ABS. Michelle Marquardt is the Program Manager, Prices
Branch at the ABS. We would like to thank, in particular,
Jan de Haan (ABS) for significant methodological
contributions. For their excellent assistance, ideas and
input into the project, we would like to thank our
colleagues from the ABS – Sarah Askew, Jessica Chew,
Neel Tikaram, Michael Webster and Isabel Zheng – and
from the RBA – James Bishop, Sue Black, Ashwin Clarke
and Tom Williams.
[*]
See ABS (2022b) for more detail. [1]
CPI rents also incorporate price information on rental
assistance and government-provided rental properties,
which advertised rents exclude.
[2]
All Australian rental property data are supplied to the ABS
by MRI Real Estate Software.
[3]
Rent assistance makes up a small share of the total private
rent index.
[4]
The index simply takes the average price of rental
properties with new tenancies in each period and
compares it with the average price in the base period. The
index is stratified by property type, number of bedrooms
and capital city and is aggregated using 2021 Census
expenditure data. Tasmania is excluded from the
estimation due to small sample size. The index is volatile
and subject to compositional change in the sample – this
is because it is not possible to have matched samples
month-on-month as rental properties do not turn over
every month. Trend lines are plotted to give an indication
of the momentum in the index.
[5]
NEW INSIGHTS INTO THE RENTAL MARKET
8 RESERVE BANK OF AUSTRALIA
