Australia’s rental market has been significantly impacted by volatile housing prices
The Australian housing market has experienced significant volatility in recent years. This instability has had a profound impact on the rental market, making it increasingly difficult and expensive for tenants to find suitable accommodation.
In this job, we see the effects of this every day. Up to 10% of adults are moving back into the family home.
The most obvious effect of the volatile housing market on renting has been a sharp increase in rents. According to a report by the Domain Group, median weekly rents across Australia rose by 9.4% in the year to June 2023. This was the largest annual increase since 2004.
There are a number of factors that have contributed to this rise. One is the strong demand for rental properties. This is due in part to population growth, as well as a decline in the number of people buying homes.
Another contributing factor is the shortage of rental properties. This is due in part to a slowdown in the construction of new rental properties.
Decreased vacancy rates
The combination of strong demand and a shortage of supply has led to a significant decrease in vacancy rates. According to SQM Research, the vacancy rate for apartments across Australia fell to 1.1% in June 2023. This was the lowest level in over 15 years.
Such a low vacancy rate has made it difficult for tenants to find suitable accommodation.
It has also given landlords more power to set higher rents.
Impact on tenants
The volatile housing market has had a significant impact on tenants. Many tenants in the rental market are struggling to make ends meet. This has led to an increase in rental stress – when more than 30% of a household’s income is spent on rent.
The Australian government has taken some steps to address the rental crisis.
In 2022, the government introduced a number of measures, including:
- A temporary increase to the National Rental Assistance Scheme (NRAS)
- A $10,000 Housing Assistance Payment (HAP) for low-income tenants who are struggling to keep up with their rent
The government has also committed to increasing the supply of affordable housing. However, it is likely to be some time before these measures have a significant impact on the rental market.
A profound effect
The volatile housing market has had a profound impact on the rental market in Australia.
Australia’s rental market is in turmoil, there’s no denying it. Vacancy rates have decreased, tenants are struggling to afford rent. The government has taken some steps to address the rental crisis, but it is likely to be some time before these measures have a significant impact.
What sort of thing can be done to fix the rental market in 2024?
Addressing the volatile housing market and its impact on renting requires a comprehensive approach that tackles both supply and demand factors.
Increase housing supply
This could be achieved by streamlining planning and development processes, encouraging the construction of high-density housing, and investing in infrastructure that supports urban densification.
Address investor demand
Reviewing policies that favor investment in property over homeownership, such as negative gearing and capital gains tax concessions, could discourage excessive investment and free up more properties for genuine owner-occupiers.
Strengthen tenant protections
Implementing stricter rental affordability measures, such as rent caps and stricter guidelines for rental increases, could make renting more sustainable for tenants.
Expand social housing
Investing in the development and maintenance of social housing would provide more affordable options for low-income households and reduce pressure on the rental market overall.
Promote alternative housing options
Encouraging the development of co-living and other shared housing arrangements could provide more flexible and affordable housing options for singles and young professionals.
Improve rental market transparency
Enhancing data collection and sharing on rental properties, such as vacancy rates and rental price trends, could help tenants make informed decisions and reduce price gouging.
Strengthen tenant rights education
Providing tenants with better information about their rights and responsibilities could empower them to advocate for their interests and negotiate more favorable rental agreements.
Support community housing providers
Expanding the capacity of community housing providers could help meet the diverse needs of vulnerable and low-income households in the rental market.
Encourage responsible lending
Tightening lending practices for property investors could reduce speculation and potential market instability, contributing to a more stable rental market.
Invest in rental assistance programs
Expanding and enhancing rental assistance programs, such as the National Rental Assistance Scheme (NRAS), could provide targeted support to low-income households struggling with rental costs.
Addressing the volatile housing market and its impact on renting is a complex challenge that requires a multifaceted approach. By implementing a combination of these strategies, Australia can work towards a more equitable and affordable rental market that provides quality housing options for all.
- Shaping Australia’s National Housing and Homelessness Plan (Treasury)
- Brutal Reality: The Human Cost of Australia’s Housing Crisis
- An interesting article about negative gearing (Australian Financial Review)