Australian tenants are struggling to find homes to live in after the national vacancy rate fell to 0.9% in August, a 16-year low, according to SQM Research.
With just under 33,000 residential properties available to rent nationwide – down from 36,700 in July – Louis Christopher, managing director of SQM Research, said the national rental crisis had deteriorated to “unprecedented levels”.
It’s also exceptionally broad-based, with all capital cities experiencing extremely tight rental markets, as the table below shows.
While supply has dropped to unprecedented levels, demand has skyrocketed, particularly with the return of international migrants to our shores.
That combination, unsurprisingly, has led to fierce competition for the few available rentals, which, in turn, has been driving up asking rents.
In the past 12 months, SQM reports asking rents jumped a staggering 20.1% across the combined capital cities, with all cities posting double-digit increases.
The reason for this rental crisis is that there aren’t enough homes for those that want to rent.
This problem has been made worse as many property investors sold up during the recent boom, with PropTrack estimating 20% of all transactions over the March 2022 quarter involved a landlord selling their property.
Of those, only 8% of these properties had another investor on the other side of the transaction.
You can clearly see how this played out in Brisbane, which experienced a surge in investor sales through 2021, according to CoreLogic.
By September, there were only 8,208 advertised rentals across the Brisbane market – 48.2% lower than the previous five-year average for this time of year.
The dwindling pool of rental properties has created stiff competition, leading to higher rental costs.
It’ll likely get worse before it gets better
Rapidly rising interest rates are causing some property investors to retreat from the market, with the value of new investor lending dropping by 11.2% month-on-month over July, according to the most recent data from the Australian Bureau of Statistics.
So the supply of rentals will likely continue to shrink, exacerbating the situation in many rental markets.
But here’s the thing. If your financial circumstances allow, now could actually be a great time to buy an investment property – with buyers regaining the upper hand following the boom.
With the balance of power shifting, there should be more ‘wiggle room’ on asking prices. That said, it’s critical to do your research so you don’t buy a lemon, rather than a quality investment property.