‘Really tough’: Why Australia’s rental market crisis is set to worsen

It’s no secret our housing market is out of control – but new data has revealed just how hard things are getting for one group of desperate Aussies.

Alarming new figures have revealed just how dire the nation’s rental crisis has become, with prices soaring out of reach for countless Aussies – and with no relief in sight.

According to the latest PropTrack data, weekly rental prices are averaging from $420 to $575 per week across our biggest cities.

PropTrack director for economic research Cameron Kusher told news.com.au it was a seriously challenging time for renters across the nation – not only those in our major cities.

“It’s really tough at the moment. Rents are rising pretty much everywhere in the country – Sydney and Melbourne hadn’t been seeing rent rises for a while, but they are also starting to increase,” he said.

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Demand is well and truly outstripping supply, with no relief in sight. Picture: Steve Pohlner

“There are a lot less properties on the market, and a lot more people looking.

“It’s extremely challenging, and there’s not much sign things will ease back anytime soon either. We’ll continue to see low volumes of new rental listings.”

What’s causing the crisis?

Mr Kusher said many investors had left the market recently, with the problem likely to be exacerbated as international and domestic borders reopen post-Covid, and as more and more investors convert their properties into short-term accommodation via platforms such as Airbnb instead of entering the traditional rental market.

“A lot more people are seeking rental properties and we don’t have anywhere near enough properties – ultimately that’s the issue,” he said, adding a few factors had led to the shift.

“A lot of people who owned investment properties have sold since the pandemic, and most buyers have been owner-occupiers,” he said.

“And lots of people living in sharehouses during Covid have realised they can’t work from home all the time with so many other people, so they have gone out and started looking for their own properties.”

This graph reveals the capital cities’ quarterly median weekly advertised rents. Picture: PropTrack

Meanwhile, Mr Kusher explained that Covid had impacted regular working and living arrangements, which meant many people were snapping up second properties outside the city and only using their city dwelling part-time, due to ongoing flexible working arrangements.

“There has been a real shallowing of the pool available to renters, and at the same time more and more people are looking for rentals,” he said.

“We need more investors to create more rental stock, or we need things like more ‘build to rent’ plans, or ultimately, we need to get more people into home ownership. That will alleviate some rental pressures, but any of those measures will take time to come to fruition.”

Meanwhile, PropTrack’s Rental Report concluded with the grim prediction that it “looks unlikely that there is any significant relief on its way” – and that things could actually soon get even worse.

“In fact, with international borders reopened and migration recommencing, we are anticipating a further tightening of rental supply over the coming months, which is likely to lead to further increases in rental rates,” the report said.

“This is expected to be most prevalent in Sydney and Melbourne, the two largest rental markets in the nation and the two markets that have, until now, been experiencing falls in rental rates.”

Weekly rents skyrocket

According to the most recent PropTrack figures, from the three months to March 2022, median weekly advertised rental rates increased by 4.7 per cent year-on-year – the strongest annual rate of rental growth recorded since before 2015.

Rents across the combined capital cities were 1.1 per cent higher over both that three-month period and the past year.

Across the combined regional markets, rents increased by 2.4 per cent over the same period and they have risen by 10.3 per cent year-on-year.

Rents are rising pretty much everywhere, whether it be the major cities or regional areas. Picture: PropTrack

Rental growth for houses remains stronger than units, with national house rents 4.3 per cent higher over the quarter and 6.7 per cent higher year-on-year, while unit rental growth was 2.4 per cent for the quarter and 2.4 per cent higher year-on-year.

After declines over recent years in Sydney and Melbourne, rents are now unchanged over the year in Melbourne and 2 per cent higher in Sydney.

At 2.2 per cent, regional Northern Territory was the only other capital city or rest-of-state market with an increase in rents of less than 5 per cent over the year.

Darwin (at 17.8 per cent), regional Tasmania (at 15.2 per cent) and regional NSW (at 12.5 per cent) recorded the largest year-on-year increases in rents, while rents have also risen by double-digits over the year in regional Western Australia, Perth and regional Victoria.

‘Less affordable than ever before’

As the rental situation spirals out of control, attention is turning to how to relieve some of the pressure facing tenants.

“Rental housing in Australia is less affordable than ever before. It is no exaggeration to call the situation a crisis, with vacancy rates at record lows,” Griffith University’s Heather Shearer and Paul Burton wrote in a recent piece for The Conversation.

“But there are some relatively simple, easy-to-implement and cost-effective things that can be done to ease rental affordability pressures.”

The pair listed a string of options that could ease the crisis, including relaxing planning restrictions on small and non-traditional houses, allowing granny flats to be rented to anyone, permitting property owners to let space to tiny house dwellers and potentially even subsidising the building of granny flats or the modification of houses to allow dual occupancy.

Originally published as ‘Really tough’: Why Australia’s rental market crisis is set to worsen