The new dataset covering both regional areas and capital cities provides valuable insights into rent inflation geographically since 2018. The COVID-19 pandemic had a significant impact on the rental market, with demand for rental properties in inner-city areas declining due to international students returning home, international migration slowing, and some young adults moving back in with their parents. Lockdowns also prompted people to desire more space than densely populated inner-city areas could provide, leading to a divergence in rent inflation across capital cities compared to regional areas.
Rents increased the most in regional areas that are furthest away from a capital city, supported by net population inflows and low vacancy rates. By contrast, rents decreased in some capital cities over the pandemic period, in part reflecting elevated supply of rental properties and weak demand due to 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.
Although rents for properties close to a central business district (CBD) began to increase in 2021, rents for many inner-city suburbs in Melbourne and Sydney are still below pre-pandemic levels. The rental market has tightened significantly in inner-city areas over the past year, particularly for new tenancies that have experienced large rent increases. Overall, rent inflation in both capital cities and regional areas has picked up recently, with both increasing by around 6 per cent over the year to February 2023.