Australia is on the cusp of a GFC-style rental crisis with more pain ahead for renters according to a leading expert.
Ray White Group Chief Economist Nerida Conisbee said Australian house rents were rising at more than 10 per cent annually, which is bad news for tenants and homeowners.
“We never saw a GFC-style housing downturn but we are certainly now seeing the beginning of a GFC-style rental crisis,” Ms Conisbee said.
“In February, weekly rents for houses increased by 11 per cent, a rate at which hasn’t been seen since 2008.”
Regional WA saw the largest increase in rents over the past 12 months, up $100 per week, followed by the ACT ($80), Greater Sydney ($70), Greater Brisbane ($70) and regional QLD ($70).
Rents have climbed across most of Australia with Melbourne recording the smallest increase at just $20 followed by regional Victoria ($40) and Greater Adelaide ($40).
Ms Conisbee said the regions with the biggest rental increases have been driven by different factors.
“Regional WA has increased by $100 per week over the last 12 months driven by the return of strong mining conditions,” she said.
“Canberra’s strong growth in the government sector has driven that city’s rents up by $80 per week.
“Strong population growth in Brisbane and regional Queensland has pushed rents up there by $70 per week.
“Meanwhile rising wealth has led to Sydney rents rising by $70 per week.”
Ms Conisbee said that while rents had increased rapidly, they were unlikely to slow down in the near future.
“International borders have now opened and we are set to see more people coming to Australia than leaving,” she said.
“This includes both international students who tend to look for accommodation close to universities, as well as migrants who tend to rent in places that already contain high proportions of people born in the same country.
“Flooding in big cities like Brisbane, as well as in regional areas, mean that many homes have become uninhabitable or require a lot of work.
“More people will require rental accommodation, as well as there now being fewer rental properties.”
Ms Conisbee said rising construction costs were also hindering supply while uncertainty around the upcoming Federal Election also likely to limit investment in the short term.
Apart from increasing housing supply, Ms Conisbee said the evolution of the “build-to-rent” sector would help reduce pressure on rents.
“Right now, mum and dad investors provide almost all of Australia’s rental housing,” she said.
“Over the past two years, there has been significant investment by institutional investors (Mirvac) and large private developers (Salta Properties) in providing rental accommodation that they own, as opposed to on selling.
“While build-to-rent still provides a minuscule amount of rental housing, it is expected to grow over coming years.”
Ms Conisbee said rent controls were not the answer as they typically lead to less rental housing, as well as poorer quality homes.
Ahead of the Federal Election, Ms Conisbee urged both parties to look at rental affordability issues and not just housing affordability.
“A US study into rent and homelessness by the Government Accountability Office in 2020 found that a median increase of $100 rent per week can cause a nine per cent increase in homelessness,” she said.
“Rents are a component of inflation and are therefore not only bad news for tenants.
“For homeowners, the 11 per cent jump in rents means the likelihood of a rate rise also increases.”
