Australia is in the middle of a rental crisis and there is no relief in sight for tenants.
Also by Michael Yardney:
Vacancy rates are dropping to their lowest point nationally since April 2006, pushing rents up for both houses and units in our capital cities.
Andrew Wilson from My Housing Market said capital city house rental prices rose 15.6 per cent in the past 12 months.
What’s causing the crisis?
It’s really just an issue of supply and demand.
There are simply a lot fewer properties on the market for rent, at a time when a lot more people are looking for rental accommodation.
Many investors sold up over the past few years and most buyers were owner-occupiers.
At the same time, other investors are taking their properties out of the long-term rental pool and moving them into short-term accommodation through platforms like Airbnb.
And the problem is only likely to be exacerbated as international and domestic borders reopen.
Further compounding the problem is the fact that household sizes have been shrinking because more tenants who previously shared accommodation are now working flexible hours from home and have started looking for their own accommodation, realising they can’t easily work with many other people around them.
And it’s not just houses
Capital city unit rents also recorded strong gains – up 17.4 per cent over the past year.
Sydney unit rents were the top performers, up 22.2 per cent, followed by Hobart (17.7 per cent) and Melbourne (13.5 per cent).
No end in sight
It’s unlikely there is any significant relief on the way, in fact things will only get worse before they get better.
The current strong demand for rental accommodation will continue to grow, with the reopening of borders and the return of high levels of migration and surging numbers of international students.
While investors are slowly coming back into the market, they're not returning in large enough numbers to significantly increase the supply of rental stock.
And we’re not building enough new apartments.
Currently, an increasing number of “shovel-ready” housing projects are being abandoned in response to soaring construction costs, jumping interest rates, uncertain end values and a pullback in development finance.
So, while the outlook is bleak for renters, property investors will enjoy higher rentals moving forward, which should in part offset the higher mortgage costs they will endure.