Why has it been two decades since Australia had a balanced rental market?
A healthy rental market is considered to occur when the vacancy rate is at or near 3 per cent but no city in Australia is, or recently has been, anywhere near that level.
The standard used by the residential property industry in Australia is that a balanced residential rental market is a vacancy rate of around 3 per cent.
At that level of vacancy, there is a good level of choice for tenants, and rents will tend to be stable.
If vacancies are above 3 per cent, that would tend to suggest oversupply. If vacancies are well below 3 per cent, then that indicates a shortage, and rents are likely to rise.
But here’s the interesting thing - Australia has not had a national vacancy rate of 3 per cent any time in the past 20 years.
The most recent figures put the national vacancy rate in July at 1.2 per cent, down from 1.3 per cent in June.
In other words, vacancies are getting lower and the upward pressure on rents continues.
Currently, five of the eight capital cities have vacancy rates below 1 per cent, as low as 0.5 per cent in Darwin, 0.6 per cent in Hobart and also well below 1 per cent in Brisbane, Perth and Adelaide.
The question is, why have vacancies been so low for so long in Australia?
Why are our elected representatives, who claim to care about the housing crisis and promise to fix it, unable to deal with this situation? It is a situation whereby the people who need or choose to rent have limited choice in the market in most parts of Australia and have to pay increasingly high rents.
Ineffectual housing policies
Most of the ideas that governments of all levels and persuasions put forward to alleviate the pressure will have no effect.
Rent increase restrictions were popular for a while, as were councils restricting the amount of time owners can rent out their property for short-term and holiday accommodation.
Various councils charge higher rates for properties offered for short-term stays and the Victorian Government introduced a yearly $750 fee for short-term stay properties and none of these initiatives have done anything to change the status quo.
In fact, a survey of owners with properties listed on short-term accommodation website Airbnb found the majority of owners would not offer their property for long-term rent even if they were no longer allowed to list it for short-term stays.
That’s because they may use it some of the time themselves as a holiday home or it is not the type of property that is suitable for permanent rental.
The only suggestions coming out of national politics are policies to smash the people who provide the product that’s in short supply – mum and dad investors.
If those ideas were implemented, the rental shortage would get worse.
The only way they will ever fix this problem is to incentivise people to become landlords, although most of the policies from politicians suggest the opposite.
Investors are good fodder for the media wanting to demonise someone for making Australian housing so unaffordable and thereby putting further pressure on the rental market.
But that is simply not the case.
Reducing bureaucratic and tax barriers that make it so expensive to create new housing would also have an impact.
The problems of housing affordability, the housing shortage, high rentals and in particular the very high cost of building new homes have all been caused by decades of government policy and bureaucracy - and that’s what needs to be addressed.
It has nothing to do with so-called tax benefits offered to property investors.
