The demand for rental properties has increased significantly, leaving many in a state of shock. The housing crisis has only gotten worse, with individuals and families struggling to find affordable places to live. This has resulted in a competitive market, with high demand leading to high rents.
In areas with high demand for rental properties, landlords have the upper hand. They can choose the most desirable tenants and charge higher rent prices. This has resulted in a rental market that is becoming increasingly unaffordable for many.
Rental affordability has become a major concern for many people. With the cost of living already high, the rise in rent prices is making it even more difficult for people to make ends meet. The government is being called upon to take action to address this growing crisis.
Experts are predicting that the rental crisis will continue to worsen unless something is done to address the root cause of the problem. There is a need for more affordable housing options to be made available, and for policies to be put in place to protect renters from exploitation.
Rent surge
Over the last year, rental prices for houses and units skyrocketed with a historical increase of 14.6% and 17.6% respectively, as the availability of rental properties dropped to an unprecedented low.
Rental prices are rapidly increasing nationwide, and the recent influx of Chinese students is expected to exacerbate the situation for tenants.
“The shortage of available properties is creating a market in favor of landlords in all capital cities, exacerbating the ongoing rental crisis in many regions,” said Nicola Powell, the head of research and economics at Domain. “The persistent increase in rental prices and heightened demand is exacerbating the already intense competition for tenants.”
Free Morrison, a landlord based in Sydney, expressed surprise at receiving an additional $50 per week for his newly acquired apartment located in Kensington, which is 4 kilometers southeast of the central business district.
This is happening as the availability of rental properties nationwide hit an all-time low of 0.8% in January, with Sydney and Melbourne declining to 1% after a temporary rise to 1.4% in December. Brisbane, Perth, and Adelaide all dipped below 1%, while Canberra and Darwin dropped to 1.5% and 1.3% respectively.
Inner-city suburbs where unit rents surged the most since the pandemic.
Table: Financial Review Source: CoreLogic
“Furthermore, the migration program for 2022/23 has increased from 160,000 to 195,000, bringing an extra 35,000 individuals who will require housing, a significant portion of whom are likely to turn to the rental market. This may have caused rental demand to surpass the average.” says Tim Lawless, CoreLogic research director.
Decrease in supply
The supply of rental properties, however, has been consistently decreasing and there appears to be no evidence of new rental homes being added to the market, as noted by Lawless.
“Private sector investment, which is the primary source of rental supply in Australia, has been declining since 2015, with the exception of a temporary increase in investment during the recent phase of robust growth in housing values,” Lawless explains.
“Investors have faced additional deterrents, including a significant decrease in their ability to claim asset depreciation since July 2017, which have likely contributed to the shortage in the supply of rental housing.
Emphasis on Homeownership
The latest PropTrack Rental Report reveals that rents are rising nationwide, with the median advertised rent being $480 per week, which represents a 6.7% increase compared to 2022.
As expected, the cities of Sydney and Melbourne experienced the steepest increases.
Rising rental costs are forcing tenants to look at alternative options, with many discovering that purchasing a home is just as affordable and offers more stability compared to renting.
Paul Ryan, a senior economist at PropTrack, stated that purchasing an apartment is currently more cost-effective than renting.
“Unit prices are usually at pre-pandemic levels, but we are now observing swift growth in rental prices,” Ryan said.
“Therefore, I believe many of these units could be nearing the point of being cheaper to buy than rent, or soon will be as rental prices are projected to keep climbing rapidly throughout 2023.”
Data collected at the end of December 2022. Includes houses and units. Source: Real Estate.
In conclusion, the rental market is becoming less attractive to tenants due to the combination of rising rents and a shortage of rental properties. Additional pressure is anticipated to come from the return of international students and an increase in skilled migrants.