Australian tenants’ burden set to worsen as rents rise

Financial strain on Australia’s tenants is expected to worsen in the coming months, with the increase in rental prices to continue to outpace wage growth.

Financial strain on Australia’s tenants is expected to worsen in the coming months, with the increase in rental prices to continue to outpace wage growth.

The national cost of long-term rental accommodation has climbed 16.6 per cent since March 2019, two months prior to the last federal election, according to analysis by property researcher CoreLogic.

While the degree of the rental changes varies across capital cities and regional locations, the data shows the housing crisis continued to worsen during the pandemic because of strong competition for few homes.

Weekly costs for tenants are also likely to be affected by rising inflation, while an expected hike in interest rates could see costs filter down from landlords.

At the start of the current financial year, renters on average dedicated 29.4 per cent of household incomes to rental payments, the highest level nationally in more than 15 years.

CoreLogic executive of research Tim Lawless said wage growth of about 3 per cent per annum was unlikely to overtake the quarterly 2.1 per cent growth in rental housing. “Chances are we’ll see the level of income required to pay the landlord will increase a ­little bit further over the coming year,” he said.

“But there will be an extent where rental affordability just simply stops rental growth … where renters will find a ceiling and what they’re able to pay.”

Over the past four years, ­regional lifestyle areas such as Noosa (up 34.1 per cent for all properties) and mining towns including Gladstone (up 35.2 per cent for all properties) recorded some of the largest gains in the country. Much of Tasmania has risen significantly, with regional areas including Launceston up a combined 28.1 per cent since March 2019, while Hobart gained 15.5 per cent.

Mr Lawless said gains as rapid at this had not been seen since pre-global financial crisis in 2008, far outpacing the 2 per cent growth per annum in line with normal economic growth.

Chief executive of Powerhousing Australia Nicolas Proud said there was no reprieve in sight for renters struggling with weekly rental demands without government intervention.

“There’s obviously going to be further difficulty for (poorer) ­people to a find a property that’s going to be within the upper-limit range of their rental payments,” Mr Proud said. “They’ll be challenged to actually find those in the first place because around the country, the amount of homes considered to be affordable is extremely low. Then you’re competing against a lot of people and that only continues to push the median upward to be more expensive.

“There’s not going to be relief unless it comes from a central government position. We really need to see federal government take a stand and actually provide structured affordable housing.”

Some of the few locations where it is cheaper to rent now as opposed to 2019 include the Sydney and Melbourne CBDs, which bore the brunt of the pandemic impacts on the property market as a result of weak migration and the movement of people to regional areas and are down a respective 0.9 per cent and 10.2 per cent across all homes.

Ray White Victoria and Tasmania chief executive Stephen Dullens expects some moderation in the future as market conditions normalise with open borders.