SHARE THIS POST
A shortage of rental accommodation, multiple applications per property and rising rents are proof that Australia’s rental market is undersupplied, with predictions the country could soon see the “biggest rent increases in living memory”.
Propertyology head of research Simon Pressley said the property market had largely survived COVID-19 unscathed despite a sharp fall in migration, with only Sydney and Melbourne recording a surplus of stock and falling rents.
“The reality is that Australia does not have enough housing supply for its existing 25.6 million population,” Mr Pressley said.
“Propertyology is predicting that these next couple of years will produce the biggest increase in rents that Australia has seen in living memory.
“Depending on which side of the fence you sit, this represents a big challenge or an extremely exciting opportunity.”
It is good news for investors, who for many years have seen little to no increase in value on their investment, with some even seeing sharp losses.
Equally, it is good news for sellers who will likely benefit from the increase in buyer demand and the return of willing investors.
“Most of Australia had an under-supply of housing (for sale and for rent) prior to COVID-19,” Mr Pressley said.
“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.”
The latest REIQ Quarterly Rental Vacancies report found that every Queensland region had experienced a drop in vacancies, with 96 per cent of those regions now in the “tight range” of 0-2.5 per cent.
The Gold Coast fell to just 0.3 per cent, Brisbane fell to 1.4 per cent, the Fraser Coast hit 0.2 per cent and Bundaberg remained at 0.4 per cent.
In Townsville, vacancy rates have fallen to their lowest level in more than 10 years, an extremely tight 0.7 per cent.
“Nobody could have predicted the extreme conditions our rental market is currently facing,” REIQ CEO Antonia Mercorella said.
In Brisbane, Living Here director Haesley Cush said the market was “rowing its own canoe”.
“The market, despite everything, is powering ahead even without international migration,” he said.
“Brisbane hasn’t seen an increase in rents for a long time and buyers and investors can see the value here.
“Even our holiday market, people are paying top dollar for incredible properties on our doorstep because they aren’t sitting on a plane for 24 hours.”
Mr Cush said the lockdowns had also forced owners to upsize or downsize their homes, and many were seeing those properties selling faster and for the asking price or better.
For investors, increasing rents, better yields and low vacancy rates were also appealing.
On the Gold Coast, Harcourts Coastal director Dane Atherton said the region was seeing up to 50 applications for each quality rental listing, and that was putting upward pressure on rents.
“It is not uncommon now to have 30 people waiting at the front door for an inspection now,” he said.
Mr Atherton said pressure was being felt in the rental market as local owner occupiers upgraded their properties, and interstate buyers looked to get into the Gold Coast market.
But he said investors, who had largely been quiet for the past few years, were staging a comeback.
“They (investors) are also seeing price growth and the appetite for the rental market,” he said.
“There is also interstate migration, and many of those are renting before buying.
“I’d say we are 100 per cent seeing an Aussie-led boom, which will be more sustainable than what we have seen in the past (led by foreign buyers).”
Mr Pressley said regional renters were also competing for significantly less available stock than renters in the two biggest capital cities.
“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,” he said.
“But the pressure on Australian rents (excluding Sydney and Melbourne) was building well before COVID-19.
“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.”
Mr Pressley said that, for many locations, the rise in rents was long overdue, with local economic conditions and affordability the two biggest influences on property demand.
He said that 98 per cent of investors who funded the housing supply in Australia were “mum and dad investors”, a sector that had been hampered by restrictions over the previous four years.
“The only way to address it is to support those who generate 98 per cent of Australia’s rental supply,” he said.
REIQ CEO Antonia Mercorella touched on the issues facing investors when their recent vacancies report was released.
“While 2020 has been one of the most challenging years, property investors have endured the most during these unprecedented times of uncertainty,” Ms Mercorella said.
“Private property owners provide the majority of Queensland’s rental housing to the State’s ever-growing tenant community, and are often incorrectly categorised as wealthy individuals hoarding far more than their fair share of real estate.
“The reality is however very different.”
Source: Real Estate AU