Australia’s Rental Crisis Deepens
A fall in vacancies has seen rents rise by as much as 21% in some capitals.
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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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Ray White’s chief economist outlines her predictions for housing market trends in 2024
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Ray White’s chief economist, Nerida Conisbee says property price growth will continue next year and mortgage holders will need to “survive until 2025” amid expectations of higher interest rates for longer.
Ms Conisbee said strong population growth and a housing supply shortage combatted the impact of rising interest rates in 2023, leading to unusually strong price growth during a rate hiking cycle. The latest CoreLogic data shows home values have increased by more than 10 percent in the year to date in Sydney, Brisbane and Perth. Among the regional markets, price growth has been strongest in regional South Australia with 8.6 percent growth and regional Queensland at 6.9 percent growth.
“As interest rates head close to peak, it is expected that price growth will continue. At this point, housing supply remains extremely low and many people that would be new home buyers are being pushed into the established market,” Ms Conisbee said. “Big jumps in rents are pushing more first home buyers into the market and population growth is continuing to be strong.”
Ms Conisbee said interest rates will be higher for longer due to sticky inflation. “… we are unlikely to see a rate cut until late 2024 or early 2025. This means mortgage holders need to survive until 2025, paying far more on their home loans than they did two years ago.”
Buyers in coastal areas currently have a window of opportunity to take advantage of softer prices, Ms Conisbee said. “Look out for beach house bargains over summer but you need to move quick. In many beachside holiday destinations, we saw a sharp rise in properties for sale and a corresponding fall in prices. This was driven by many pandemic driven holiday home purchases coming back on to the market.”
3 key housing market trends for 2024
Here are three of Ms Conisbee’s predictions for the key housing market trends of 2024.
Luxury apartment market to soar
Ms Conisbee said the types of apartments being built have changed dramatically amid more people choosing to live in apartments longer-term and Australia’s ageing population downsizing. “Demand is increasing for much larger, higher quality, more expensive developments. This has resulted in the most expensive apartments in Australia seeing price increases more than double those of an average priced apartment. This year, fewer apartments being built, growing population and a desire to live in some of Australia’s most sought-after inner urban areas will lead to a boom in luxury apartment demand.”
Homes to become even greener
The rising costs of energy and the health impacts of heat are two new factors driving interest in green homes, Ms Conisbee said. “Having a greener home utilising solar and batteries makes it cheaper to run air conditioning, heaters and pool pumps. We are heading into a particularly hot summer and having homes that are difficult to cool down makes them far more dangerous for the elderly and very young.”
More people living alone
For some time now, long-term social changes such as delayed marriage and an ageing population have led to more people living alone. However, Ms Conisbee points out that the pandemic also showed that many people prefer to live alone for lifestyle reasons. “Shorter term, the pandemic has shown that given the chance, many people prefer to live alone with a record increase in single-person households during the time. This trend may influence housing preferences, with a potential rise in demand for smaller dwellings and properties catering to individuals rather than traditional family units.”
Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
