The c-word used to describe rental markets' record low vacancy rates
As vacancy rates around the country hit record lows, the situation has been described as a crisis that is forcing people into homelessness, driving up rent payment defaults and prompting emergency meetings across the state and federal levels of government.
It’s been variously described as a crisis, disaster and root cause of homelessness, but however it is labelled the rental situation in Australia has become dire for many trying to put a roof over their head.
And while investors may be reaping the benefits, or at least offsetting some of their rising mortgage costs, landlords are also feeling the pain as rent arrears begin to pile up from those unable to pay.
New data released by FLK IT OVER, a document signing tool used by property managers, shows notices to tenants for rent arrears has increased by 45 percent since January.
Company founder Andrew Colagiuri the data examined notices issued for more than 300,000 rental properties for the first six months of this year in NSW.
“It was a surprise to us at the speed of the change,” he said.
“It's a concerning jump that shows tenants are feeling all the current factors around cost of living and inflation,” said Mr Colagiuri.
“Also, notices to increase rent has spiked by 220 percent since the start of the year,” Mr Colagiuri said.
State and federal governments are all to aware of the crisis that has enveloped the country, with the national rental vacancy rate at the lowest point on record at just 1 per cent.
Sydney’s vacancy rate remains at its lowest point on record, at 1.4 per cent. It has remained steady for the past four months, suggesting that tightening rental conditions may be stabilising. A healthy vacancy rate in a balanced market is considered to be between 2.5 and 3.5 per cent.
But PropTrack data shows the number of potential renters per listing to be 96 per cent higher in some suburbs.
Brisbane’s vacancy rate is at a record low of 0.6 per cent, compared with 1.2 per cent this time last year. Adelaide continues its reign as the most competitive capital city in which to find a rental, remaining steady at 0.3 per cent.
Canberra’s vacancy rate has hit a six-month high and Hobart an 11-month high, at 0.8 per cent and 0.5 per cent respectively.
“We are not seeing the market being driven by greedy owners,” Mr Colagiuri said.
“It’s the knock-on effect of significant changes to interest rates and cost of living that’s affecting everyone in the property ecosystem.”
Minister for Housing and Minister for Homelessness, Julie Collins, met with her state counterparts last week and said integrated solutions were needed to address Australia’s housing challenges.
“My state and territory colleagues also discussed the priorities, challenges and housing strategies in their jurisdictions, providing key insights, including how the Albanese Government’s initiatives will boost and leverage their recent investments to increase social and affordable housing,” Minister Collins said.
She said Federal Government’s housing reform agenda includes the $10 billion Housing Australia Future Fund that will build 30,000 social and affordable housing properties in its first five years; Help to Buy program; Regional First Home Buyer Support Scheme; establishment of a National Housing Supply and Affordability Council; and development of a new National Housing and Homelessness Plan.
Property Council of Australia Chief Executive Ken Morrison emphasised that the challenge of housing affordability doesn’t disappear when interest rates go up.
“This needs to remain a critical area of policy focus, with the official data continuing to show a looming housing supply crunch coming and we know that rental markets are tightening fast,” he said.
“It will be important that the new National Housing and Homelessness Plan delivers solutions for housing supply, encourages more rental housing and incentivises the creation of affordable and social housing.”
Tim McKibbin, Chief Executive Officer, REINSW, said “crisis” remains the most appropriate term to describe the rental situation.
“The overwhelming message from agents across New South Wales has been that there’s a huge shortage in supply, including rental accommodation.
“Meanwhile demand is strong and will only increase further in coming months and it all adds to the urgency of government and industry working together to address the supply challenge.”
Monthly vacancy rates
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Real Estate Institute of Australia’s President, Hayden Groves, also said the country was now at crisis levels, with rentals being pulled from the market.
The number of people who now own their own home outright has reduced significantly over the past two decades, he said, with the 45- to 54-year-old age bracket plummeting from 41.4 per cent to just 18.5 per cent over the past two decades.
“The proportion of retirees with mortgages has reached almost 10 per cent over that same period.”
Mr Groves said input from private investors – representing 27 per cent of the housing spectrum – would be a crucial factor in the success of a National Plan for Housing and Homelessness.
“Most affordable housing is delivered by the private sector, particularly rentals.
“Investors have been selling over the course of the COVID-19 pandemic, which in turn has seen the national rental pool shrink considerably.
“It is this group that needs to be paid some attention given investors have been selling at a faster rate than buying property which is further fuelling the supply crisis – a fact that has, so far, been largely ignored.
“While this shortening of supply varies across the nation, in some areas there are 10 – 15 per cent fewer rentals available than there was at the start of the COVID-19 pandemic.”
Mr Groves said that while REIA welcomes the announcement the Albanese government aims to provide $10 billion in funding to build 30,000 social and affordable properties, the current construction skills, materials and liquidity crunch means decision makers must look at better utilisation of existing housing inventory to ensure more supply.
“The creation of a less onerous tax system that will encourage investors to supply housing is critical.”