Australia’s Rental Crisis Will Only Worsen
A fresh look at rent affordability has revealed a brewing crisis throughout Australia, with costs of living continuing to rise. House prices across Australia have surged in recent years, making home ownership harder for a growing number of people, including first-timers, and the rental market is under considerable stress, too, with dwindling supply and rising prices. People unable to afford to purchase homes are being forced into the rental market, which has, in turn, placed enormous stress on the supply and affordability of rental properties, driving prices higher.
For many Australians, the dream of owning a home is becoming increasingly unattainable because of skyrocketing home prices and rising interest rates, meaning that many are left on the rental market. Australia has entered into a deeper rent crisis, with tenants facing increased competition over the shrinking pool of rental properties available, driving rents up nearly 12% across capital cities over the past 12 months at an accelerating pace. Australia is already gripped by a housing crisis, where spiralling rents are forcing families to turn to social housing, where the waiting lists are just as daunting as those in private rentals. Low-interest rates and rising home prices are being blamed for the housing crisis — six of eight Australian capital cities show less than 1% vacant properties.
The latest Domain Rental Vacancies Report further shows the inequity of pain, with the worst vacancy rates in the suburbs around Melbourne, which, as in this area, is where so many live as homes are cheaper. Before Covid, regional cities offered more affordable housing than capital cities, so a spike was felt harder by households with limited budgets.
Rents in capital cities
In the last 12 months, rents in capital cities have increased a record 14.7% in houses, while unit rents rose 11.2%. Brisbane is the capital that has recorded the biggest combined increase in rentals over the 12 months, rising 15.2 per cent, driven by an increase in the asking rent for houses of 21.2 per cent. Redfin, the national property brokerage, showed that the median house asking rent in January was up 15.2 percent year-on-year. That has now changed, SQM Research data shows, with the annual Sydney home rental growth for March rising 17.1 percent, with a median price of $766.70 a week.
House rent costs have increased by double-digits in most capital cities over the last year, and three-quarters of renters in certain parts of south-west Sydney are financially stressed and struggling to meet bills. Parts of Australia are facing spikes in rent stress and homelessness, with the governments latest round of Covid protections winding down, rent markets tightening, and landlords scrambling to recover outstanding rent liabilities. The intensity of rent pressures differs throughout Australia, but attractive regional locations like the Sunshine Coast are falling prey to the perilous combination of rising rents, fewer rental properties available, and an influx of interstate arrivals looking for a change of scenery. These postal codes are particularly hard places to live rent-to-buy, with 76.5% of tenants experiencing rental pressures in the Campbelltown area, in Macarthur, the seat held by federal Labor, according to new data from the housing rights advocacy group Everybodys Home, digital finance analytics firm Digital Finance Analysis and University of NSWs Centre for the Futures Research at New South Cities.
SQM Research reported this month that an estimated 40,000 properties are currently unoccupied on lease across Australia, which amounts to only 1.1 per cent of the rental market. Dr Michael Fotheringham, managing director at the Australia Housing and Urban Research Institute, said the market for rentals was tightening nationally, except for smaller, inner-city properties typically occupied by overseas students. According to the latest Anglicare Annual Rental Affordability Snapshot, just 2% of the rental properties in the market nationwide as of March were classified as affordable for workers earning minimum wage.
Anglicare Australias annual Rental Affordability Snapshot looks at 45,992 rental listings, looking for those that are cheaper than a third of a persons income. Anglicare Australia executive director Casy Chambers said the rental affordability crisis did not emerge overnight. Someone on an aged pension, for example, could only afford 312 rental properties in all of Australia in March — that is less than 1% of the entire national market. To add to the burden, movers have had to endure a rental bond before they can move in. While lenders offer bond loans to qualifying prospects, paying it off on top of your monthly rent is a potential headache in the future.
Property groups said there was a lot more to do to increase the supply and availability of social and affordable homes. In addition to building more housing stock, experts say the Australian Government should consider lifting Income Support payments to help lower-income households cope with rising rent prices.
Lack of housing
Meanwhile, lawmakers in Miami and Tampa — both of which saw rents rise by more than 30 percent in the last year — are discussing declaring housing emergencies in order to implement rent controls. Of course, jumps are already fueling calls to tighten controls, which would cap annual rental increases. As with Australia, rising US rents are reflecting many factors, including the lack of a housing stock.
Rents rose parallel to rising house prices, and with more people priced out of home purchases, that increased upward pressure on rents. As explained in October, when the crisis was building, rising rents in the lower tiers of the market have been gobbling up a disproportionate share of the incomes of renters, leaving them with less money to spend. While there has been a well-publicised spike in people moving to regional and coastal areas, the biggest driver of Australias rent crisis is the large numbers who are staying put.
National rents rising
Recent data from CoreLogic found national rents rose 3.2 per cent, the biggest one-off rise in the National Rental Index since May 2007, with the regions, Darwin and Perth accounting for much of that rise. Sydneys rental market has been described as a chronic slam-dunk, with the citys vacancy rate falling to a five-year low of 1.7 per cent — but it is better than the 1.1 per cent nationwide figure, and significantly better than Perth and Canberra at 0.5 per cent, Adelaide at 0.3 per cent and Hobart at 0.2 per cent.
In releasing Domains latest report into vacancies, real estate sites research and economics director, Dr Nicola Powell, said the nation was in a rent slump. Australias rental pricing crisis is expected to deepen in 2022, as borders open up for overseas students, with property costs rising by twice the already high rate of inflation.