Tenants, landlords clamour for share houses in worsening rental crisis

The worsening rental crisis is driving more people into share house arrangements, while more than a quarter of Aussie tenants are running scared from their landlords.

At least ten suburbs around Australia have hundreds of people seeking a spare when literally none are available.

New data from Flatmates.com.au has revealed demand for share accommodation is heating up early ahead of the summer peak season.

The site recorded an 11.2 per cent increase in members joining the platform in the past month, up from a busy September and 15.6 per cent higher than October 2022.

Property owners facing higher mortgage and cost of living expenses are also renting out spare rooms in increasing numbers. New property listings on the site have jumped significantly, up 9.7 per cent over the month and 38 per cent in the past year.

Claudia Conley, Community Manager, Flatmates.com.au said the rental crisis has driven record numbers of people to look for share accommodation.

“It’s clear more Australians are turning to share accommodation as pressures on the rental market and a cost-of-living crisis fail to die down.

“An increase in property listings by 38 per cent since the same time last year reflects the growing trend of homeowners renting out their spare rooms.

“Half of all our property listings are from homeowners, with the majority of these being live-in landlords renting out a spare room in their home.

“Despite this growing trend, more property listings are still needed across the country to keep up with the growing demand for share accommodation.”

Renting out a room may generate extra income, but also raises an array of tax issues.

A separate survey released Wednesday (8 October) has also cast a light on the drastic measures many are resorting to as rents continue to skyrocket.

Comparison site Finder found that almost half (42 per cent) of Australian tenants said they struggled to pay their rent in October. More than a quarter (27 per cent) have avoided contacting their landlord or real estate agent because they were worried about having their rent put up.

Rents rises outpacing yields

Limited supply, combined with strong demand, is pushing rental prices higher but rental yields, while rising, are not doing so at anywhere near the same pace due to property prices accelerating.

The national median weekly advertised rent on realestate.com.au at the end of the September 2023 quarter, the most recent data available, was $550 per week, up 3.8 per cent over the quarter and 14.6 per cent over the year.

New rental listings recorded a 5.7 per cent annual decline in September 2023, marking the fewest new rental listings in September for more than a decade.

With a low volume of new listings coming to market, the total number of rental listings was at a record low after falling 7.1 per cent year-on-year.

The national vacancy rate was also sitting at a record low of 1.1 per cent, down from 1.3 per cent a year earlier.

Cameron Kusher, Director Economic Research, PropTrack, said there has been a moderate increase in lending to investors so far this year, indicating some investors are coming into the market, however, a heightened number of investor-owned properties continue to be sold, keeping the overall stock of rental properties low.

“It appears unlikely there will be any imminent relief from the tough rental market conditions in the major capital cities,” Mr Kusher said.

“We expect supply to remain tight and demand to stay persistently strong, which is likely to push rents higher.”

Rent rises have more than tripled the pace of capital city rent yield rises over the past 12 months.

In September 2023, gross rental yields for houses were 3.8 per cent, up from 3.5 per cent at the same time a year earlier. Gross rental yields for units were 4.7 per cent in September 2023, up from 4.2 per cent.

For investors looking for the highest rent yields, the biggest cities and states are best avoided.

The lowest gross rental yields in September 2023 were found in Sydney (3.7 per cent), Melbourne (3.9 per cent) and regional Victoria (4.1 per cent). The highest gross rental yields were found in regional Western Australia (7.2 per cent), regional Northern Territory (6.7 per cent) and Darwin (6.6 per cent).

Melbourne (-32.2 per cent), Perth (-30.2 per cent) and Sydney (- 30 per cent) saw the largest declines in total rental listings compared to their September five-year average. Conversely, Hobart (45.3 per cent), Canberra (24.7 per cent) and regional Tasmania (15.6 per cent) recorded the largest increases.

State offers rent relief

Real Estate Institute of Western Australia’s CEO, Cath Hart, said many tenants were experiencing significant stress, while investors were also being forced to sell properties, further exacerbating the situation.

The WA Government announced on Wednesday it will provide one-off rent relief payments to help eligible tenants at risk of eviction due to their rent being in arrears to negotiate with their landlords to extend their tenancy.

Under a $24.4 million program, community service organisations like Anglicare WA and Vinnies WA will identify tenants in need through their existing services and networks, and will assist those tenants in applying for relief.

Relief may involve the payment of arrears, and in some cases, support will also be provided to cover up to 50 per cent of future rent costs for up to three months - capped at $5,000.

Ms Hart said the initiatives would also be welcomed by investors.

“The median rent has risen by 18 per cent in the last 12 months, but the average mortgage has risen by 47 per cent since rates started rising and will go up again after yesterday’s increase by the Reserve Bank of Australia,” she said.

“Investors are also under increasing financial strain and some are selling as a result, however, what we are seeing is these homes are usually bought by owner occupiers, not other investors.

“This puts further strain on an already tight rental market.

“When tenants fall into arrears, it impacts investors’ finances. By working to prevent this, the program also supports investors, helping keep them in the market, and we need every investor we can get at the moment.”