What’s going on with Rentals in Australia?

Renting in Australia. There’s no better word to describe it at the moment.

It’s a CRISIS.

This is affecting all of us in some way. Maybe you’re looking for a place yourself, and it’s proving far too difficult. Maybe it’s you kids, cousins, stepbrother, or dog who’s struggling to find a place. It’s not just the personal impact either, this rental situation has far-reaching effects upon the broader property market and macroeconomy here in Aus.

According to CoreLogic, the total number of rental listings has hit a 10-year low – importantly, the last time it was at this level was when Australia’s population was 10% lower.

Applicants in areas of high demand, such as the inner suburbs of Adelaide, Sydney, Brisbane and Melbourne are often facing immense competition when applying for properties. There are several startling stories of families applying at up to 100 different properties, still waiting to be approved. This incredibly sad situation is a demonstration of the immense undersupply that plagues the market.

At the end of the day, it’s all centred around basic economics. The supply and demand of property dictate how prices change, and how the rental market works.

So, to gain a bit of clarity, let’s look into things a bit further – allowing us to really gain some clarity into the rental crisis and what it means for investors.

First of all… WHY?!

At the crux of all of this, is the notion that there is a huge undersupply of rental properties in the market, leading to ridiculously low vacancy rates, and steep prices. SO, why is this the case?

At the beginning of the Pandemic, everybody thought that the world was going to cave in, consumer sentiment and household savings rates went up, meaning that people were lacking the confidence to go out and purchase investment property. Less purchases of land and new builds meant that there was less demand for property, setting us back a couple of years of supply for future tenants.

Alongside this, the lack of confidence to spend also meant that people were looking to save wherever they could. Share Houses became all the more popular, as it provided a great way to minimise the cost of living. Now people are more confident with their money, and we all want a little more space, the general idea is that people are all looking for their own rentals. This further steepens the demand on an already undersupplied market.

Another key factor to the rental crisis is the shift to short-term rentals through platforms like Airbnb. This further reduces the pool of rentals available to prospective tenants looking for longer 6 to 24 month leases. Some councils are imploring their homeowners to remove their places from these short-term rental sites to ensure that there is greater supply. Brisbane City is placing a 50% increase on the rates of all properties that are listed as short-term rentals.

This perfect storm of limited supply, and crazy demand has sparked a crisis in cities and regional areas across the country.

So, what does this mean for property investment?

As we always say, the key to successful property investment is purchasing QUALITY property in locations that show clear signs of demand and growth. This occurs through tailored strategic planning that encompasses all aspects of YOU. It relies upon a clear ideation and understanding of your goals, finances, family situation and work – as ultimately, the perfect property journey is different for everyone.

As investors, there is huge potential in finding this kind of quality property at this point in time, given the expansive demand. At the same time, providing a means to contribute to growing supply is a point of interest – especially in the concept of investing in new builds (new builds blog post)– a notion that we LOVE.

The deepening rental crisis will continue down a similar path as interest rates rise, and people struggle to confidently move towards purchasing their first home. A natural path of renting to investing will become longer, ensuring that demand will continue to grow. On top of that, the growth in the national median rent, of 17% over the past year, highlights the incredible growth that has already occurred. Furthering on this, as COVID restrictions continue to ease, migration will increase, further saturating the market.

As a savvy investor, despite the crowing of the media, suggesting the housing market will crash, your clear economic understanding would highlight that the Australian property market is one fuelled by a huge disparity between supply and demand. As people continue to pay more for rentals, and demand continues to grow, it provides a unique circumstance for prospective investors.

At the end of the day, we’re all about promoting strategic long-term growth through property investment. BUT, if you can harness supply and demand in the short-term, well, that’s just the cherry on top.

Are you keen to journey into the investment property market, or take your portfolio to the next level?

Give us a call on 1300 776 735, we’d love to chat!