By Kate Burke
Tenants are struggling to find affordable homes amid Australia’s rental crisis, and experts fear the situation could worsen as the number of vacant rentals drops to record lows.
Rental vacancy rates reached record lows of 0.8 per cent in Melbourne, 0.9 per cent in Sydney and 0.6 per cent in Brisbane last month, new Domain data show, while vacancies in Perth held at a low of 0.3 per cent.
Advertised rents are set to rise by 11.5 per cent this year amid rental supply shortage and strong demand according to Westpac.Credit: Peter Rae
Nationally, just 0.8 per cent of rental properties were vacant, holding at a record low, and the number of empty rentals was down 33 per cent year-on-year. Melbourne had the largest drop in vacancies, down 64 per cent annually.
Vacancy rates in Hobart (0.6 per cent), Canberra (1.5 per cent), Darwin (1.2 per cent) and regional Australia (0.8 per cent) were up year-on-year, but remain at low levels, while Adelaide’s rate was steady at 0.3 per cent.
Domain’s chief of research and economics Dr Nicola Powell said the rental crisis was a result of reduced new housing supply and investment activity, the rise of short-term letting and a drop in household sizes as people sought out more space during the pandemic which the Reserve Bank has previously estimated could have created demand for an extra 140,000 homes.
The shortage of homes was then exacerbated by increased demand from returning international students, migrants and tourists seeking short-term stays recently.
“We haven’t had enough investment activity, we haven’t been building enough housing … and then on top of that, we’ve now got international students and migration returning.”
Powell said there had been a clear spike in overseas interest, driven by Chinese students who were informed in January that online degrees would no longer be honoured in China.
“That really opened the floodgates,” she said, noting Domain.com.au rental searches from China were up almost 90 per cent from December.
Powell said there was currently “no light at the end of the tunnel” for renters, and that more affordable rental accommodation was desperately needed to meet increased demand.
Tenants Victoria’s director of community engagement Farah Farouque said it was an excruciating time to be a renter, with tenants facing strong competition and steep rent hikes, even for subpar properties.
“We’ve seen rents go up from $30 a week to as much as a $480 [per week] increase for a Melbourne share house. Those tenants had to move … they simply couldn’t afford it,” she said.
“People are making absolutely excruciating choices about which bills to pay, whether they’ll skip a meal to direct money towards their rent ... and we’ve had months of this,” she said.
Rental affordability had long been a challenge for low-income earners and those on government assistance, but it had become even harder, as relatively affordable rentals in outer suburbs dried up. Moderate to middle-income earners, even those with good rental histories, were also feeling the pressure, she said.
Increasing the supply of affordable rentals was key to addressing the crisis, Farouque said, but market intervention was also required, as the current approach was not working. One such intervention could be limiting the size of rent increases, as in the ACT.
Nancy Navarrete, a property management business development executive at Ray White NSW, said limited rental supply was resulting in huge turnouts at inspections for stock-standard properties.
“You list a property online, and it goes immediately, some people are applying before they even see a property, and you’re seeing 30 to 40 people going through two-bed apartments … it’s just insane, there’s a lot of people looking and needing help,” she said.
Conditions had improved slightly in regional NSW, she noted, as some people returned from temporary sea and tree changes earlier in the pandemic, easing rental demand.
Navarrete said competition was now strongest in inner-city and inner west suburbs popular with students, where demand and rental prices were returning to pre-pandemic levels. However, increased competition had rippled across the city, as renters were pushed further afield to find affordable homes.
Navarrete said tenants were continuing to offer to pay above the advertised rent to try to secure a home, though agents have been banned from soliciting such offers.
There was also increased demand for larger share houses again, as the cost of renting solo or with one other slipped out of reach for some, and she expected households would continue to consolidate amid the rising cost of living.