Australian apartment rents projected to soar 28% by 2028

Apartment rents across Australia are expected to rise by 28% between now and 2028, according to new forecasts from CBRE’s Apartment Vacancy and Rent Outlook, which examines 53 precincts in the country’s major capital cities.

The median rent for a two-bedroom apartment across these precincts is projected to grow by $155 per week between 2024-2028. A 30% increase is forecast across 25 precincts over the next five years, including Sydney’s Eastern Suburbs, Parramatta, Melbourne Inner East and North, almost all precincts in Brisbane, and North-West and South-West Perth.

Sameer Chopra, CBRE’s Pacific Head of Research, noted that in 2013, only four precincts in Australia had an average rent of over $600 per week for two-bedroom apartments. By June 2023, this had grown to 20 precincts, and by 2028, CBRE expects 41 precincts – or over 75% of Australia’s two-bedroom apartments – to have a rent exceeding $600 per week.

“Unfortunately, some of the potential apartment supply has been trimmed and pushed out. This has seen a 9% reduction in potential supply over the period from 2023-2028, this is what has contributed to our growth forecasts,” Chopra said.

CBRE Research forecasts that capital city apartment vacancy will fall to 0.8% by 2028 from 1.8% in 2023, which will be one-third of the previous decade’s 2.5% average. A balanced market for apartment rentals would typically see vacancy around 4-5%, and CBRE estimates 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.

Some of the markets expected to see the sharpest falls in vacancy include suburbs near Sydney’s Eastern Suburbs, Melbourne’s Inner East and Southeast suburbs, Brisbane’s Southeast and North Gold Coast suburbs, and North Canberra. The vacancy situation is tight (sub 1%) in large parts of Adelaide, Melbourne, and Perth, and CBRE forecasts this to continue over the next five years.

Despite the projected rent increases, Chopra said he still expected the cost of renting to remain more affordable than purchasing across Australia’s major cities.

“Monthly rent payments are currently 22% 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% lower than monthly mortgage repayments in 2018 and in December of that year the RBA’s cash rate was 1.5% compared to 4.35% in December 2023,” he said.