Australia’s rental market has been through a tough year, tightening further amid sustained strong demand to rent and a critical shortage in available rentals
New PropTrack data shows the national rental vacancy rate hit a new low in October after falling 0.06 percentage points (ppt) to just 1.02%.
This record low vacancy is a long way from what we typically see as “normal conditions” in the 2-3% range or the pre-pandemic rate of 3.3%, illustrating the critical shortage of available rentals and tough conditions many are experiencing.
Rental conditions in Sydney deteriorated further in October, with vacancy sliding 0.08 ppt to a record low of 1.11%. Vacancy in Melbourne also hit a record low, falling 0.06 ppt to 1.09%.
Vacancy rates remain below 1% in Brisbane, Adelaide and Perth.
The rental vacancy rate in Queensland remained at a record low and Brisbane had very few properties available to rent in October, with the vacancy rate falling 0.04 ppt to sit at just 0.87%.
Perth’s vacancy rate has been sitting below 1% for 15 months, falling a further 0.02 ppt over October to reach just 0.7%.
Adelaide is still the city with the lowest vacancy in the country, although conditions are no longer worsening with vacancies holding relatively steady at just 0.67%.
Since late 2021, rental market conditions have tightened considerably in city markets that were hit hardest by the pandemic, spurred by smaller households, cities springing back to life and the surge in net migration and student arrivals.
In these tight conditions, with rental markets remaining in crisis mode and continuing to deteriorate, it will be difficult for many to find an available rental and upward pressure on rental prices will remain.
The national median weekly rent has increased by 15% year-on-year, from $480 to $550. Price increases are even stronger in Perth (22% year-on-year), Sydney (18% year-on-year) Melbourne (16% year-on-year).
Strong price increases mean many tenants are likely to be spending an increasing portion of their income on rent, with stress rising.
With strong rental price increases the share of affordable rentals has dwindled. In October, only 11% of rental listings were listed for less than or equal to $400 – though there are even fewer in the capitals.
In Sydney just 4% of rentals were listed for less than or equal to $400 in October.
Faced with a shortfall in affordable rental properties, rising rents and highly competitive conditions, more renters turn to share housing.
A new survey from Flatmates.com.au, with over 10,300 respondents from across Australia, has revealed the impact that the rental crisis and ongoing cost of living pressures are having on Aussies.
Almost half of all respondents, including both room listers and renters, said that the primary reason they were living in share accommodation was because they could not afford to live on their own.
While share housing is typically popular amongst younger demographics, the number of older Australians seeking shared accommodation is also on the rise. Members aged between 55 and 64 years old were the fastest growing demographic on Flatmates.com.au in the past year, recording a 21% annual increase.
Lifestyle change, marriage breakdowns and retirement are likely to be some of the drivers of the increasing number of older Aussie’s seeking shared accommodation.
But it’s also illustrative of the critical state of the nation’s rental markets, with strong demand outstripping rental supply, resulting in increasing rental price pressures, properties leasing quickly, and tenants likely spending larger share of income on rent.
Extreme tightness in the rental market is shining a spotlight on the current housing shortage.
The good news is investor activity has picked up, but unfortunately, demand to rent remains well above pre-pandemic levels, vacancies are historically low and growth in the supply of new housing is limited at a time when there is already a shortage.
Rental supply is the critical fix here, but a slowdown in building completions amid strong population growth and smaller household sizes means reprieve for renters is unlikely to be on the horizon.
While conditions are expected to remain tight without a meaningful increase in the supply of available rentals, the silver lining is that conditions may not continue to deteriorate at the pace of the past 18 months.