Despite affordability constraints, the price for rentals in Australia is continuing to rise. The 2021-22 Q3 report by CoreLogic found that throughout the country, in cities, regional areas, houses and units, rent continued to increase in Q3, resulting in the highest calendar year growth rate since 2007. The report also revealed that the national rental index increased by 1.9% during the December 2021 quarter; a repeat figure of the September quarter.
But why is this?
Simply put, there is more demand than supply; more people looking for their own spaces, especially as the pandemic wears on.
However, what’s important to note here is that this change is not a one-time occurrence. The housing market is cyclical; sometimes this falls in favour of the tenant, other times it falls in favour of the landlord.
Many Australians are reporting big swings in price when it comes to renewing leases. What is causing this change? Let’s take a look at the bigger picture and look at everything you need to know about what’s been dubbed as the current ‘rental crisis’.
Increase in demand as international borders reopen
In the early months of the pandemic, the local rental market was completely flipped. Vacancy rates rapidly increased, especially in major capital cities as students moved back home and international students moved back overseas.
However, as lockdowns have come to an end and borders are opening, we’re seeing the rental market in Australia begin to recover. With international students and backpackers beginning to return to our shores, the demand for rentals is expected to quickly rise even further.
Put simply, the demand for rentals is up.
Additionally, as a secondary result of the pandemic, we’re also seeing a stall in the pipeline of new rentals. This comes as a result of supply chain disruptions combined with shortages of workers and materials, which has meant that there have been national widespread delays in construction. This has contributed to a low demand and short supply, which has driven up prices.
A competitive housing market
Throughout 2021, house prices in Australia rose 27.5%; making the market very competitive. During this time, there has been an increase in owner occupiers entering the market, upgrading or buying holiday homes that aren’t being added to the rental pool.
However, as a result of this, the share of first-home buyers in Australia has fallen to 16% in October 2021 (despite investor lending being at an almost-high), which means that more people are renting for longer than they otherwise would. This has given landlords and management companies leverage to raise rent.
Rent freezes expiring
Early in the pandemic, each state and territory introduced covid-19 mandates, with some placing limits on rent increases, and some prices freezing altogether. However, as those measures expire, landlords are having to factor in two years’ worth of rent increases to match national inflation.
Wealthier renters
An interesting outcome to come of the pandemic has been the huge shift we’ve seen in the way people work and live. Amongst this is the opportunity that white-collar workers now have to work from anywhere. As a result, we’re seeing people moving from pricey cities to more affordable regional areas. Oftentimes, those moving interstate are choosing to rent until they decide on where they’d like to permanently buy.
In fact, throughout the fourth quarter of 2021, we saw regional rent continue to outpace capital city rents with regional housing rising 2.5% against the 1.6% increase in capital cities. This took the annual regional rental growth rate to 12.1%, which conversely, saw regional units see a rental increase of 41.4% in the last decade, compared to capital city figures of 14.4%.
Interestingly, we’ve seen this in Darwin with a number of new tenants moving to the Territory as they now have more flexible working arrangements and experience living in the Top End.
While the current landscape is in favour of landlords, that’s not to say that this won’t change. If you’d like further information on the current rental climate in Darwin, or would like to get an updated appraisal of your property, please don’t hesitate to contact us via email at belinda@thrivepropertynt.com.au or call us on +61 8 8911 0741.