Possibly the most important story for Australian real estate in 2021 will be an all-time record increase in household rents and a dire shortage of accommodation for people to live in.
It will not be uncommon for households to need to find an extra $2000 to $5000 per annum to secure a standard rental property over the next couple of years.
Depending on which side of the fence you sit, this represents a big challenge or an extremely exciting opportunity.
Most of Australia had an under-supply of housing (for sale and for rent) prior to COVID-19.
While this germ has managed to cause quite a bit of inconvenience for Australian lifestyles, no germ has the ability to dump thousands of extra dwellings out of the sky. In other words, Australia is still under-supplied.
At the end of October 2020, there was a combined 53,525 dwellings advertised for rent for Sydney and Melbourne’s combined population of 10.5 million people.
The remaining 15.1 million Australians are competing in bidding wars for just 20,696 dwellings in the other six capital cities and the increasingly popular regional wonders.
Five out of eight capital cities currently have a vacancy rate below 1 per cent. The pressure is intense.
From Maitland, NSW to Margaret River, WA, Mount Gambier, SA, Mackay, Qld, and Mildura, Vic, Propertyology is tracking an additional 50 individual towns across Australia with vacancy rates below 1 per cent.
This represents the tightest rental conditions that Australia has ever seen. Anyone who forecast a downturn clearly has no clue what ‘housing demand’ truly means.
COVID-19 cannot be blamed for everything. A health pandemic is not responsible for a lack of housing.
If anything, the societal reaction to lifestyle restrictions caused by this germ has merely transferred housing demand from locations like Sydney and Melbourne to others. But the pressure on Australian rents (excluding Sydney and Melbourne) was building well before COVID-19.
Fact: it is becoming standard practice for property managers in every corner of the country to frequently receive numerous applications to rent a standard house.
The intense pressure affords property managers the luxury of being particularly fussy when assessing the quality of tenant applications.
Propertyology’s buyer’s agents have seen first-hand proof of multi-offer tenant applications and the successful tenant paying $50 to $70 per week above the market’s median rent. It’s a frenzy.
There are reports of families living in tents and caravans because there’s nothing available for them to rent.
The potentially significant increase to rental income is great news for those Australians who have chosen to be proactive and invest in their future financial independence.
For a lot of locations, the rent increases that are now expected is long overdue.
According to data by SQM Research, Canberra ($648 per week), Sydney ($638) and Darwin ($580) have the highest capital city advertised medians rents for houses.
A lack of rental supply has caused this problem.
The only viable solution are the everyday Aussie mum-and-dads who desire to not be reliant upon a miserly taxpayer-funded aged pension in retirement.
The problem will get worse before it gets better and the only way to address it is to support those who generate 98 per cent of Australia’s rental supply.
