With tight housing markets a global problem, Americans are finally seeing rents deflate – but Australian renters are unlikely to get relief any time soon.

Realtor.com analysis of advertised rents across the 50 largest US metro areas found in the 12 months to May, the median asking rent dropped 0.5 per cent to $1739 ($2619) per month; the first annual decline since the organisation began tracking rental data in 2020.

In Australia, CoreLogic data shows combined national rents rose 9.9 per cent over the same period, with the national median rent for dwellings sitting at $2332 per month.

The pace of local rent hikes are starting to ease alongside vacancy rates; the national vacancy rate rose slightly from a record low of 1.1 per cent to 1.2 per cent in May.

Tim Lawless, CoreLogic research director, said Australia’s rental market won’t mirror what’s happening in the US because there are too many differences between the markets.

In Australia:

• The majority of rental listings are still owned by private investors rather than institutional or corporate ownership
• Private sector investment in new rental stock is low
• There is record demand for rental stock boosted by high levels of migration.

“We’ve got this really challenging situation of a very low amount of rental supply and no immediate signs of rental supply rising, while rental demand is getting higher and higher,” Mr Lawless said.

Vacancy rates are expected to remain low for the near future, but he said rental price growth will slow as renters hit their affordability ceiling.

Slowing rent hikes aren’t good news

A slowing of rent increases is not necessarily a good sign for the economy, senior research fellow at the UNSW City Futures Research Centre Chris Martin said.

In the current Australian context, rents would stop increasing when people are pushed out of the market (into homelessness or share houses, for example).

This happens when disposable incomes reduce, meaning people spend less on goods or services. This results in workers having hours cut and being unable to find more work.

Therefore, those workers can’t afford rent and are forced out of the market.

A better way for rent to decrease would be for rental supply to increase, through more public housing, unused properties going into the market or build-to-rent projects, for example.

“That’s how interest rates in the short term affect rent,” Dr Martin said.

“The [Reserve Bank of Australia] is quite clear on that as well; the interest rate increases work through the household income channel and put downward pressure on rents by removing renters from the housing market.

“That may be part of the story behind the United States seeing their asking rents go down, and it might also be part of the story for those first tentative signs of asking rents in Australia also trending down compared to where they were a year ago.”

Renters pushed out of the market

Australia is already seeing the effects of rent increases on people whose income has not kept up.

Mr Lawless said demand for rentals will decrease due to a range of negative social outcomes, including adults moving back in with parents, being forced into shared accommodation, and being homeless.

The data backs this up; share house platform Flatmates.com.au saw a 140 per cent surge in membership in April and May, with almost 70,000 people joining the platform.

Competition for a room is fierce, with areas like Perth’s east having a ratio of 255 would-be tenants per available room.

Meanwhile, support services for people who are homeless have seen a 26 per cent jump in demand for help over the past three years, and they are having to turn away an average of 300 requests for help every day, with most of these requests about accommodation.

Mr Lawless said the rental crisis won’t ease in the next 12 months, but increased investments in build-to-rent and social housing provides hope in the medium to long-term.

With many Australians feeling the negative effects of the RBA’s key monetary policy tool – cash rate hikes – Dr Martin said the bright side is more people are now talking about alternatives to the “blunt” and “damaging” tool.

“That includes in the rental sector, such as through regulating our rent increases,” he said.

“So the fact that that’s on the agenda, where it’s been absent for decades in Australia … and [it’s] being talked about seriously [now], that is a good thing.”