Latest News2011 - the Year of Paying More RentWednesday, 26 April 2017

Capital city rents are set to rise by 7 per cent this year and rose faster than inflation in 2010, putting additional strain on household budgets, new figures show.

RP Data said rents in capital cities rose 4.2 per cent in the year to December, above the 2.7 per cent official inflation rate over the same period. Outside capital cities, rents rose 2.9 per cent, RP Data said.

"We expect rents to increase by around 7 per cent during 2011," RP Data analyst Cameron Kusher said, adding rents would rise most for inner city units and the more expensive housing markets on metropolitan outskirts.

"For the coming year we expect rental markets to tighten further and rental growth during 2011 will likely eclipse that of 2010," Mr Kusher said.

This week ANZ Bank and National Australia Bank released separate reports, while US group Demographia listed Australia's capital cities as some of the least affordable in the English-speaking world.

That affordability crisis will leave many renters in capital cities - where the bulk of Australians live - with little choice but to pay more for a home.

Australian Bureau of Statistics data released yesterday showed housing costs rose 0.6 per cent in the December quarter, taking the annual rise to 5 per cent.

Over the three months to the end of 2010, RP Data said rental growth was unchanged nationally even as it rose 1.4 per cent in capital cities.

In the December quarter, rents on houses rose 2.9 per cent to a median price of $360 a week in Melbourne, while in Sydney they were flat at $450 a week. In Brisbane, where leasing costs are tipped to rise following this month's floods, the weekly median rent of a house rose 1.4 per cent to $365 in the quarter. In Perth, the December quarter rent rose 1.3 per cent to $385 a week, RP Data said.

"Despite sluggish growth over the quarter and on an annual basis we expect that capital city markets are likely to have strong prospects for rental growth during 2011 and the rate of growth is likely to be closer aligned with average levels over the last five years," the report said.

Over the past five years, capital city rents have risen 44.2 per cent, to a median weekly price of $375.

"Vacancy rates remain tight in the capital cities, first home buyers remain relatively inactive, interest rates are at higher levels and new supply coming on-line is quite constrained," the report said.

NAB's residential property survey, which tipped moderate falls in house prices in 2011, said rents would increase 2.8 per cent in the same period, and 4.1 per cent over the next two years.

The official cash rate, currently at 4.75 per cent, is tipped to rise, as the Reserve Bank readies for an outbreak of inflation that it fears will result from Australia's tight labour market and on-going demand from Asia for Australian commodities.

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