{"id":176549,"date":"2025-02-03T15:30:00","date_gmt":"2025-02-03T04:30:00","guid":{"rendered":"https:\/\/propertyupdate.com.au\/?p=176549"},"modified":"2025-01-31T16:35:53","modified_gmt":"2025-01-31T05:35:53","slug":"how-long-will-australias-rental-crisis-last","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/how-long-will-australias-rental-crisis-last\/","title":{"rendered":"How long will Australia\u2019s rental crisis last?"},"content":{"rendered":"

Australia\u2019s rental market is in crisis.<\/p>\n

Vacancy rates<\/a> remain extremely low, rental stock is extremely slim, and high rental prices mean the market is red-hot. .<\/p>\n

So how did we get into this rental crisis?<\/p>\n

How long will it last?<\/p>\n

And what does it mean for property investors?<\/p>\n

Currently, Australian residential rental markets still heavily favour landlords, as tenants face challenging conditions due to increasing demand and a limited supply of rental properties.<\/p>\n

\"pencil<\/picture><\/span>

Note: <\/span>The latest Domain report<\/a> reveals that Australia\u2019s era of explosive rental growth appears to be nearing its end.<\/p><\/div><\/div>\n

<\/div>After enduring the steepest and longest rental surge in history, all capital cities have passed their peak in growth rates w have now stalled or even begun falling in some areas.<\/p>\n

But despite the evident slowdown in rental growth, tenants are still grappling with record-high asking rents across most of the country.<\/p>\n

Across the combined capitals, data shows that house rents increased 8.3% year-on-year and remained unchanged over the three months to September.<\/p>\n

Meanwhile, median unit rent across the combined capitals has maintained a record $630 per week<\/strong>, unchanged over the quarter but up % year-on-year.<\/p>\n

\"Quarterly<\/p>\n

Source:<\/strong> Domain<\/p>\n

Domain notes that rental demand is easing, with the number of prospective tenants per rental listing on Domain falling to its lowest level since 2019, indicating a better balance between supply and demand.<\/p>\n

At the same time, affordability constraints are driving demographic shifts, prompting tenants to seek house shares or opt for intergenerational living to alleviate the financial strain.<\/p>\n

On the supply side, one encouraging shifts has been a rise in investment activity, with the value of investor loans rising by 35% annually.<\/p>\n

It seems strategic investors are looking to get ahead of the crowd before the RBA lowers their cash rate which will likely spark housing activity, but while the trend is promising, fact is, there is a very long way to go before the crisis winds down.<\/p>\n

Why is there a rental crisis in Australia?<\/span><\/h2>\n

The main reason is simple: Australia\u2019s rental market is undersupplied.<\/strong><\/p>\n

A balanced rental market has a vacancy rate of around 2%<\/strong>, and anything below 2% describes a situation where tenant demand exceeds the supply of available properties.<\/p>\n

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Note: <\/span>The current national vacancy rate sits at just 1.2%.<\/p><\/div><\/div>\n

Why so low?<\/p>\n

Put simply, there are fewer rental properties in Australia today because there are fewer investors buying property (owner-occupiers have dominated the market) and the number of investors selling up has trended upwards.<\/p>\n

There are nearly 11 million households in Australia and the majority are owner-occupiers.<\/p>\n

In fact, 67% of those households are homeowners, while 31% (which equates to around 7 million people) are renters.<\/p>\n

The remaining 2.1% (192,200 households) are other tenures, including households that are not an owner with or without a mortgage, or a renter.<\/p>\n

\"Proportion<\/p>\n

Source:<\/strong> ABS<\/p>\n

The problem is, there just isn\u2019t enough rental stock available for 31% of the population.<\/p>\n

Why?<\/p>\n

There are several reasons\u2026<\/p>\n

1. Supply is low<\/h3>\n

A large number of investors have been selling up. According to data by PropTrack, approximately 30% of sellers in the market currently are\/were investors, and similarly, many investors (mistakenly) sold up during the post-COVID-19 property boom of 2020-21 as they looked to secure peak prices for their properties and sell up. Many of these properties were purchased by owner-occupiers, effectively reducing the supply of rental\/investment properties.<\/p>\n