Rents skyrocket as housing crisis settles in for long term
As the nation’s housing crisis continues to unfold, it’s worth reflecting on the fact that there are actually two separate issues, with two very different timelines.
There is the continued deterioration in the proportion of homes that are considered affordable to buy. A median earning household is only able to afford 13 per cent of properties, according to an analysis from PropTrack, when in 2000 it with roughly half.
Then there is the lack of rental accommodation and skyrocketing rents. This trend began far later and has taken a much more acute path than the deterioration in affordable housing.
According to figures from SQM Research, in December 2019, the national rental vacancy rate was 2.8 per cent, its equal second highest reading since records began in 2005. As of February, the national rental vacancy rate is just 1.0 per cent.
While a 1.8 percentage point drop may not sound like much, it’s the difference between there being more than enough properties that rents are largely flat and the acute shortage we currently face with double digit increases in rents.
As the nation closed out the 2010s, the national combined asking rent on an aggregate measure of all dwellings was $410 per week (all rental price statistics cited are from SQM).
With the highest national rental vacancy rates in almost two decades and rental price growth far below wages growth, it was clear the rental market at the time was adequately supplied with homes at an aggregate level.
By the time the nation’s borders reopened toward the end of February 2022, the rental crisis was already acute, with the rental vacancy rate falling to just 1.2 per cent and asking dwelling rents nationally up by 21.4 per cent. Since the end of 2019, asking dwelling rents nationally in aggregate have risen by 51.2 per cent.
Not all regions, towns and cities have fared similarly, with some having asking rents rise by far less than wages and others in absolute dire straits with extremely low vacancy rates and rents rocketing . To put the increase in asking rents since the start of 2020 in perspective, between August 2009 and December 2019, asking dwelling rents rose by 22.7 per cent.
Between the end of December 2019 and April 2024, asking dwelling rents rose by 51.2 per cent. If we extrapolate the rate of rental price growth seen in the data in the years prior to the pandemic (2009 to 2019) on to the present, since the start of the pandemic a bit over four years ago we have seen the equivalent of 20.2 years’ worth of rental price growth (including the impact of compounding).
The largest rise in asking rents in the nation was in WA’s Goldfields region, where they rose by 96.0 per cent. Outside rural areas, South East Perth had the largest increase in asking rents, up 87.7 per cent, followed by the Gold Coast Main up 85.8 per cent.
Despite the enormous growth in rents since 2020, the latest figures from SQM show that asking dwelling rents at a national level are up 9.5 per cent in the last 12 months. While rental price growth may moderate, the backdrop of demand continuing to grow significantly faster than supply, appears to assure continued price growth in excess of wages growth for the immediately foreseeable future.
There are no politically easy answers to either of Australia’s housing crises, but with the ongoing rental crisis set to last for longer than any other in generations, the issue of housing is likely to remain front and centre.
Tarric Brooker is a freelance journalist and commentator @AvidCommentator