Why Is Australia In A Rental Crisis?
In This Weeks How's The Market | Edition 35
Why Is Australia In A Rental Crisis
In Between A Rock and A Hard Place
Not Your Average Wow Factor
Why Is Australia In A Rental Crisis?
It has been widely recognised that Australia is in a rental crisis and the unfortunate news is that it doesn’t look like it’s going to get better anytime soon. Let’s have a look at what caused this.
1. Covid, The Zoom Boom & A Desire For Space
As Covid came about, there was a natural tigheting of the rental market as we all looked for more space. Relationships broke down and sharehouses dissolved causing a huge rise in single person households as confirmed by the 2021 census showing a 17.1 per cent rise in the number of single person households between 2016 and 2021.
We discovered that working from home was more possible than ever which meant that more people wanted additional rooms for home offices.
As the market was also experiencing a once in a generation boom, families were rushing to purchase holiday homes and additional dwellings out in the country too. This all resulted in a sharp decline in vacancy rates.
As more holiday homes were purchased, there were less properties available for rent.
2. Interstate Migration
Covid and the Zoom Boom also made many Australians consider interstate migration to chase lifestyle and additionally escape Melbournes ongoing lockdowns. Typically, this saw many from Melbourne and Sydney move north to chase the lifestyle of Queensland, but also their more affordable housing.
In addition, we also saw a huge volume of people migrate from capital cities to regional areas within their own states.
This put a huge unexpected pressure on the regional rental markets as well as QLD as a whole.
3. International Migration
Since the reopening of the international borders, there has been a flood of international migrants rushing into Australia.
The Albanese Government also announced a range of measures to accelerate Australia’s immigration intake, including:
• increasing the permanent migrant intake by 35,000 to 195,000
• increasing the duration of post-study work visas for international students by two years in areas of skills shortages
• allowing international students to work unlimited hours while studying, effectively turning student visas into unrestricted work visas; and
• allocating $36 million dollars and 500 extra staff to clear visa backlogs, thereby accelerating international arrivals.
There has additionally been recent changes to Chineese legislation stating they will no longer recognise foreign academic degrees and diplomas if the study was conducted online. This alone is estimated to bring an additional 30,000 - 40,000 Chinese students into Melbourne & Sydney.
It is common for most international migrants to rent in Australia for the first two years of their arrival prior to purchasing.
4. Interest Rates & Inflation
Throughout this same period, we have also experienced the fastest increase in interest rates since the late 80s. This increase has heavily effected first home buyers and investors pushing more first home buyers to continue renting whilst simultaneously stopping investors from investing which is reducing rental supply coming onto the market.
As the cost of everything is increasing with inflation, it is also making investment properties more expensive to hold which is an additional factor pushing landlords to increase rents.
When Will Rents Go Down In Australia?
Unfortunately, not anytime soon.
This will largely depend on the RBA getting inflation under control and dropping interest rates which could take years.
Some economists are saying the quickest way for rents to become more affordable is for wages to increase.
What The Agents Are Saying
Between a rock and a hard place.
Many agents have provided details as to the extent of the above problem this week as they have explained to me the predicament first home buyers are in as they are stuck between trying to find a rental property or buying and dealing with the increased interest rates.
Whilst out in Geelong this weekend, many of the agents said that inspection numbers have drastically decreased in recent months. Whilst 5 - 8 groups through opens was normal for all of last year, now numbers are down to 1 or 2.
For regional centres like Geelong that have experienced an unprecedented increase in demand over recent years, many suburbs haven’t actually experienced any price decreases this downturn, though I imagine as inspection numbers dwindle that this cannot be far away.
The exception to this is still with fully renovated homes in great areas near great schools as these types of properties are still achieving great results.
The Wow Factor!
114 Olinda-Monbulk Road, Olinda, Vic 3788
An entrance and a view.
Most of the Wow Factor properties we feature include wow factors inside the property, however, this property has a wow factor upon entrance.
Check out the driveway up to the house, the canopy trees and the gated entrance. Wow.
In The Media
Commonwealth Bank profit jumps to $5.15bn amid rising interest rates
In an interview asked about the banks announcements of recent profit, Phillip Lowe was seen laughing whilst admitting it’s not great for borrowers but it is great for the nations economy…
Final Thoughts
As the rental crisis looks like it is going to continue for years to come, investors may be able to soften the blow of the hard interest rate increases of this year, whereas first home buyers will struggle to save a deposit even more and then also borrow amidst the rising interest rate environment.Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is my opinion, please seek your own expert advice when making decisions.
