There’s been no let-up in the recent tales of distress resulting from the dramatic worsening of rental affordability and vacancy afflicting our capital cities and regional centres. And we’re only at the start of what is shaping up as an extended period of strong rental demand.
Abnormally low vacancy rates have displaced housing affordability from top of the national agenda, leaving governments on the defensive without a meaningful response to a situation that has been years in the making yet requires an instant solution.
We can blame the pandemic for part of the problem. Many landlords suffered significant financial loss when tenants broke leases for a myriad reasons – to return to their home countries or back to the family home when jobs evaporated. Some to take advantage of falling rents and upgrade their accommodation.
Whatever the reason, the millions of mum and dad investors who had looked to property to build a nest egg and at the same time provide accommodation to the 2.6 million Australian households who rent their home, bore the brunt of the Covid-19 measures to protect the vulnerable.
As a result, when the pandemic gloom lifted and property prices headed for the stratosphere many saw an opportunity to cash in the capital gain.
This loss of stock from the rental pool only compounded a lack of enthusiasm from property investors that had been evident pre-pandemic.
The last time Australia was in the grip of a housing affordability crisis investors copped the blame. Cast as the villains robbing young first home buyers of an opportunity to share in the housing pie, they faced increased borrowing costs to purchase.
Then the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which ran from 2017 to 2019, brought about a tightening in lending that restricted access to credit and affected the entire industry, putting a brake on new housing and lending.
So now we have a situation where demand outstrips supply and we are living with the inevitable consequence.
In a balanced rental market the industry standard is 3 per cent vacancy. In March 2020 vacancy levels in Sydney stood at 2.7 per cent, Melbourne 1.6 per cent and Brisbane 2.1 per cent.
Two years later in March 2022 Sydney had 1.4 per cent vacancy, Melbourne 1.8 per cent and Brisbane just 0.7 per cent.
But anybody in property management, and tenants themselves, will tell you that the situation is far worse than these figures suggest in many locations.
There is no joy in holding an open home to see queues of hopeful tenants knowing that only one will secure a roof over their head that day.
Our R&W offices around NSW and Queensland continue to have a steady supply of houses and apartments for rent but they spend very few days on market and the pricing reflects the demand-supply reality and the 5.1 per cent inflation that has escaped nobody’s notice.
So maybe it’s time to reframe our view of private property investment and encourage greater participation in the market.
Governments have a duty to play their part in adding to the diminished supply of social and affordable housing and the emerging build-to-rent sector will also play its part, though not necessarily meeting affordability objectives.
But these measures are slow to turn around and only put a small dent into satisfying demand. We need faster delivery of quality new housing stock and more mum and dad investors, the people who have for decades provided rental accommodation.
Because if we are unable to meet current demand now, when population growth has been stalled for two years and immigration is still just a trickle, we are facing a grim future in which homelessness dominates the national conversation.
