Rental crisis only going from bad to worse

The prospect of the rental crisis abating anytime soon appear forlorn, with rental prices continuing to soar while vacancy rates remain at historic lows around the country.

In Sydney residential vacancies have just hit a nine-year low, rents are again rising in Melbourne, Perth is at a 40-year low for rental property availability, and Queensland’s dire rental market has stirred up calls for the size and frequency or rent rises to be restricted by legislation.

While the rental crisis is widespread and its impact reverberates throughout society, it is the young to early middle age that are feeling it the most.

Professor Hazel Easthope, Deputy Director of UNSW’s City Futures Research Centre and co-author of report into housing stress, said adults aged 18–44, those looking for work and people living in rental housing are the groups most vulnerable to housing stress, while those aged 65 and above who own their own home, have a postgraduate degree and are engaged in full-time employment are the most resilient to housing stress.

“Life events that impact housing stress can occur more rapidly for younger people who have not had a chance to build up the safety net to fall back on, such as savings from their career or support systems,“ Professor Easthope said.

Dr Milad Ghasri, lead author of the report from UNSW Canberra, said their research found that renters are 125 per cent more likely to enter housing stress than owners and are also less likely to recover from it.

The probability of recovering from housing stress in the first year of entering housing stress is 39.4 per cent for renters and 48.9 per cent for homeowners.

“While younger adults are more likely to enter housing stress, they’re also more likely to recover from it, according to the research, however, adults aged 65 and above who are less likely to enter housing stress are much less likely to exit it if they do,” Dr Ghasri said.

“For older people, if they use up all their resources, they may not be able to easily pivot in the job market or have certain obligations which make it less likely they will recover if they fall into housing stress following a critical life event.” 

The critical life events that increase the likelihood of entering housing stress are the birth/adoption of a child, separation, marriage, giving care to a family member, or being let go or made redundant.

Sydney renters reeling

The REINSW Vacancy Rate Survey results for January 2023 show that residential vacancies in Sydney are at their lowest level since November 2013.

“The vacancy rate for Sydney overall dropped 0.3 per cent for the month to be just 1.5 per cent,” REINSW CEO Tim McKibbin said.

“This nine-year low in Sydney vacancies is proof that the rental crisis is showing no signs of abating.

“Demand for rental accommodation across Sydney is at an all-time high and many REINSW members simply have no available properties on their rent rolls, while those that do are reporting that properties are being snapped up immediately.”

Mr McKibbin said REINSW members across New South Wales are saying they’ve never experienced a rental market like this.

“The availability of stock in the rental market is at an all-time low, weekly rents are rising and tenants are faced with ever-increasing living costs.

“None of these things are showing any signs of getting better, in fact, they’re getting worse.

“All stakeholders agree that increased investment in the sector is the only solution, but the current strategy is to constantly erode the rights of landlords - something has to change.”

Meanwhile, the Real Estate Institute of Australia has singled out the rental crisis as its highest priority.

Laws to curtail rent hikes

That erosion of landlord rights is an issue that has come to a head in Queensland.

A proposal by Tenants Queensland and Queensland’s peak body for the community service sector, QCOSS, for the Queensland Government to limit the size and frequency of rent increases in the state has met with resistance from various real estate industry stakeholders.

Kevin Young, President of Property Club, said it would only serve as a disincentive for investors to provide more rental stock.

“Property investors have been leaving the market because of increasing government red tape as well as new Federal Government-engineered rules that limit the timeframe of interest only loans and the removal of tax depreciation benefits on second hand properties, while higher interest rates have also been a disincentive for investors.

“As a result, there has been a huge decline in new loans for property investors in Queensland over the last year,” Mr Young said.

Since January 2022 to December 2022 the monthly figure for new investment loans has fallen by over $700 million from $2.28 billion to $1.51 billion.

“This decline in new investment housing finance and the resulting decline in supply of new rental properties is the real reason we are having a rental crisis.”

New residential vacancy rate data released by the Real Estate Institute of Queensland suggests the state is still feeling the pressures of a thinly stretched rental market, with a state-wide vacancy rate of just 0.8 per cent for the December 2022 quarter.

But Real Estate Institute of Queensland CEO, Antonia Mercorella, said rent control would not be a panacea for the rental crisis and would likely have the opposite effect and exacerbate challenging rental conditions.

“We are acutely aware of the devastating impacts of the rental crisis and against that backdrop, it’s understandable that some tenants’ advocates are proposing rent control as a solution - but rent control is not the panacea that many argue it to be,” she said.

“It’s clear Queensland does not have sufficient rental housing supply to meet the ever-increasing demand for rental properties and, as a result, we are living in the tightest rental market in the history of our state.

“However, rent control is a short-sighted solution to a complex problem and could significantly deter property investment and reduce rental supply at a time when we’re already in a rental crisis.

“Rental legislation needs to work in all markets and it needs to be fair and balanced because on one hand, renters need to be afforded statutory protections and on the other, if restrictions on what property owners can and can’t do become too onerous, there will be a proportion of property owners who simply choose to walk away.

“This delicate balancing act is a tricky one to get right, but it’s important that the regulatory framework is fairly balanced and isn’t too tipped in the favour of one party,” Ms Mercorella said.

Going from renter to homeowner

New research commissioned by OpenLot.com.au ranked the top 10 suburbs in Australia where renters have the budget to purchase a nearby house-and-land package.

OpenLot.com.au founder Qi Chen said this research is timely given the combination of low vacancy rates, falling property prices and government assistance for first home buyers.

Qi Chen, Founder and CEO, OpenLot.com.au

New research commissioned by OpenLot.com.au ranked the top 10 suburbs in Australia where renters have the budget to purchase a nearby house-and-land package.

OpenLot.com.au founder Qi Chen said this research is timely given the combination of low vacancy rates, falling property prices and government assistance for first home buyers.

“Life is hard for renters right now, given that vacancy rates are very low and rents are rising quickly in many parts of the country, so it’s natural that a lot of people want to leave the rental market and climb onto the property ladder instead,” he said.

“One impediment for first home buyers is that interest rates are rising, which is reducing many people’s borrowing capacity.

“However, property prices are falling in many regions right now and that’s great if you’re a first home buyer, because it lowers your barriers to entry.

“Another reason why now is a good time to be a first home buyer is because there’s plenty of government assistance around.

“At the federal level, first home buyers can take advantage of the First Home Guarantee and Regional First Home Buyer Guarantee, which let people enter the market with a deposit of as little as 5 per cent, while various states are offering buyer grants and stamp duty concessions.”

Top 10 ranking

Source: OpenLot.com.au Property Ladder Report. *Rental properties are regarded as ‘officially’ vacant when they’ve been on the market for 21 days or more. When a suburb has a vacancy rate of 0%, it means all rental properties are being filled in less than 21 days of being listed for rent.

Position Property Director Richard Lawrence said critically low vacancy rates have created an ideal opportunity for investors seeking affordable residential properties within Brisbane’s inner ring.

“Demand is overwhelmingly outstripping Brisbane's current rental supply, as well as its short-to medium-term supply pipeline,” Mr Lawrence said.

“Rental vacancies are also at historic lows with high yields, making it the perfect time for investors to consider entering the market.

“With interest rates rising, many investors are re-evaluating what would constitute a sound investment for their personal financial circumstances with many first-time investors now considering one or two-bedroom apartments, rather than the traditional four-bedroom home.”

Mr Lawrence recommended investors consider the benefits of purchasing a property off-the-plan.   

“There are many benefits to investing in a brand-new property, such as potential asset depreciation tax benefits and new property attracting a better quality of tenant in many cases”, Mr Lawrence said.