Their shared analysis has found that not only have prices been rising sharply for decades, but notably, low-income households are disproportionately renting rather than owning property, as well as paying a higher proportion of their income on rent.
The latest data indicates that tenants are being squeezed not just from a pricing perspective, but also in competition for rentals, which has reached an unprecedented peak.
Four capital cities, namely Sydney, Melbourne, Brisbane and Perth, are currently experiencing never-before-seen lows in vacancy rates – with the overall national levels also at record lows.
Residential rental vacancies in Sydney are now at a low not seen since April 2011, according to the Real Estate Institute of NSW Vacancy Rate Survey results for March 2023.
“More than a decade has passed since we last saw residential vacancies at such dire levels in Sydney,” REINSW CEO Tim McKibbin said.
“In January this year, vacancies fell to 1.5% – the lowest level since November 2013. Alarming as that was, the trend continued in February with a rate of just 1.4%. Now, with the results for March available, we can see that the downward spiral continues. A drop of 0.1% to 1.3% sees residential rental vacancies in Sydney at their lowest since April 2011.
“Month after month, the story remains the same – rental availability is spiralling downward, stock is diminishing and rents are skyrocketing.
“Calling it a rental ‘crisis’ doesn’t adequately describe the state of the market and the turmoil, pain and stress that is being experienced by everyone involved – tenants, landlords and property managers. More than a crisis, it really is a horror story.”
Queensland lacking supply
Though the Sunshine State’s vacancy rate rose marginally from 0.8 per cent in the December 2022 quarter, to 0.9 per cent in the March 2023 quarter, this is still well short of the ideal 2.6 – 3.5% rate as prescribed by the Real Estate Insititute of Queensland.
And REIQ CEO Antonia Mercorella said while the March quarter results offered some rental market relief, most of the state was a long way off from being out of the woods.
“Queensland is still worlds away from a healthy rental market and a grossly insufficient level of housing supply is squarely to blame.
“When we’re witnessing these very tight vacancy rates persisting right across the state, it’s highlighting the importance of ensuring that we keep levels of property investment up so that we can maintain rooves over the heads of our growing population.”
Mortgage inflection point also affecting renters in Western Australia
In the west, while Perth’s vacancy rate was 0.7 per cent in March, unchanged from February and January, Real Estate Institute of WA CEO Cath Hart said the ongoing shortage of rental properties meant more rent rises were a certainty, with many tenants facing their first increases since interest rates started to rise nearly a year ago.
“There has been a lot of talk about the ‘mortgage cliff’ and the financial shock about 800,000 Australians will feel as their fixed rate loans return to variable this year following 10 interest rate rises, but there are also thousands of tenants on fixed-term leases facing a similar issue.
“Data from www.reiwa.com shows Perth’s median monthly rent has increased 17 per cent since April 2022, however ABS data shows a 44 per cent increase in WA’s average mortgage repayments over the same period.
“Tenants who may have signed 12-month agreements in April, May or June last year for example are likely to see their rent payments increase, perhaps significantly, when their lease expires in the next few months as owners pass through some of the significant increases in their mortgage repayments for their investment property.”
PEXA’s Chief Economist Julie Toth said that despite representing a significant portion of the housing market, the private rental system was plagued by a number of issues that have resulted in suboptimal outcomes, particularly for low-income families and the vulnerable.
“Australia is already one of the hardest places in the developed world to be a renter. The biggest problem is insecurity – long term leases are rare, and renters live with constant uncertainty about whether they will have to move. For renters who are constantly required to move, this impacts their ability to feel part of a community, it affects continuity of schooling for children, and renters often face unexpected moving costs – often thousands of dollars per move – which could push many on low incomes into greater levels of financial stress.
“Although median wages have largely kept pace historically, rent is increasingly unaffordable for lower income people and some of Australia’s more vulnerable demographics. More concerning, the difficulty in acquiring and keeping private rental accommodation is a leading cause of homelessness.”
The upcoming final instalment of the PEXA and Longview Whitepaper series, to be released in May, will explore solutions to Australia’s three housing crises – housing affordability, rental affordability and rental experience.