Australia's Rental Crisis Deepens
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Australia’s Rental Crisis Deepens

A fall in vacancies has seen rents rise by as much as 21% in some capitals.

By Terry Christodoulou
Wed, Apr 13, 2022 11:42amGrey Clock < 1 min

Rents in some Australian capital cities have seen asking prices jump by as much as 21% in the past year, with further rises likely in the coming months according to data from SQM research.

Across the combined capitals, asking rents for houses ascended nearly 15% during the year, while unit rents rose 11%.

The growing number of tenants living on their own combined with the return of international students has seen strong rental demand at a time when supply was diminishing according to Louis Christopher, SQM Research managing director.

“The magnitude of rental increases across the country is unprecedented,” said Louis Christopher, SQM Research managing director. “I’ve never seen such sweeping rental increases nationwide, ever.”

Brisbane saw the highest increase in asking house rents with a 21.2% rise in the past year.  This was followed by Sydney’s rise of 19.1%, Canberra (16%), Adelaide (15.5%), and Perth (12.2%) while rents climbed 10.7 in Darwin, 7.6% in Melbourne and 7.1% in Hobart.

The number of available rental homes has also dipped sharply across the inner-city suburbs of Australia.

Melbourne’s CBD saw vacancies slump by 69.1% to 556, while Brisbane fell by 70% to 141. Sydney also fell steeply, posting a decline of 45.2% to 323 in Sydney CBD, while the inner-west recorded a 54.1% drop alongside a 52.8% drop in the eastern suburbs and a 47% drop in the lower north shore.

In the Adelaide CBD, the number of vacant rental apartments plummeted by 78.7% to 82 while Perth’s CBD dropped by 37.8% to 84.

“The rental crisis has deepened with rental vacancy rates across the country falling to just 1 per cent.”

“As a result, market rents have exploded. And the recent monthly data suggests we are still not at the worst point of the crisis,” added Christopher.

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House values continued to fall last month, but the pace of decline has slowed, CoreLogic reports.

In signs that the RBA’s aggressive approach to monetary policy is making an impact, CoreLogic’s Home Value Index reveals national dwelling values fell -1.0 percent in November, marking the smallest monthly decline since June.

The drop represents a -7.0 percent decline – or about $53,400 –  since the peak value recorded in April 2022. Research director at CoreLogic, Tim Lawless, said the Sydney and Melbourne markets are leading the way, with the capital cities experiencing the most significant falls. But it’s not all bad news for homeowners.

“Three months ago, Sydney housing values were falling at the monthly rate of -2.3 percent,” he said. “That has now reduced by a full percentage point to a decline of -1.3 percent in November.  In July, Melbourne home values were down -1.5 percent over the month, with the monthly decline almost halving last month to -0.8%.”

The rate of decline has also slowed in the smaller capitals, he said.  

“Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off, while persistently low advertised stock levels have likely contributed to this trend towards smaller value falls,” Mr Lawless said. “However, it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched.” 

The RBA has raised the cash rate from 0.10 in April  to 2.85 in November. The board is due to meet again next week, with most experts still predicting a further increase in the cash rate of 25 basis points despite the fall in house values.

Mr Lawless said if interest rates continue to increase, there is potential for declines to ‘reaccelerate’.

“Next year will be a particular test of serviceability and housing market stability, as the record-low fixed rate terms secured in 2021 start to expire,” Mr Lawless said.

Statistics released by the Australian Bureau of Statistics this week also reveal a slowdown in the rate of inflation last month, as higher mortgage repayments and cost of living pressures bite into household budgets.

However, ABS data reveals ongoing labour shortages and high levels of construction continues to fuel higher prices for new housing, although the rate of price growth eased in September and October. 

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