Tough time ahead for renters until investors jump back in
The rent crisis is starting to hit home after being highlighted throughout the election campaign as a major concern.
Finder.com.au reports that an increase in rent prices is adding to the already high cost of living.
“If you’re renting and your rent has gone up in the last 12 months, you’re not alone,” says Finder’s Rebecca Pike. “Rental prices in Australia have been increasing for a while now and unfortunately, it doesn’t look like they’ll be stopping any time soon.”
According to CoreLogic figures for April 2022, median weekly rents across Australia are nine per cent higher than they were the same time last year.
With the cost of living increasing so much too, Australians are feeling the pinch.
So, how much longer do we have to put up with these prices?
CoreLogic head of residential research Eliza Owen said rents will continue rising at least for the next six months.
Why are we seeing rising rents?
If you were renting in Australia throughout the pandemic, you may have noticed a drop in rental prices within capital cities.With very few international migrants, and people moving away from the cities, there was an increase in available supply.
In particular, during 2020, Sydney and Melbourne saw huge decreases in the price of unit rents.
While some of the current rental price growth we’re seeing now can be put down to the market correcting itself, some cities are surging ahead of their pre-COVID prices.
Ms Owen puts this down to a couple of factors, the most prominent, she said, is the strong economy and rising incomes.
According to the Australian Bureau of Statistics’ latest wage price index, wages grew by 2.3 per cent annually in December 2021 and welfare payments like JobSeeker have also increased.
“Now that we’re starting to see higher wage growth, increases in incomes tend to put upward pressure on rent values,” Ms Owen explained.
Add that to the return of international migrants, combined with years of lower property investment due to government caps and market conditions, demand for rental properties is outstripping supply.
“Investors weren’t as active between 2017 and 2019 because of changes to lending, like the cap on investor loans,” Ms Owen said. “That dampened the investor segment and even at the beginning of COVID there was uncertainty around investment property purchases before we had government responses.”
What’s going to happen next?
“Rents will continue to rise at least over the next six months and I think that’s because we’re going to see increased rental competition from the return of overseas migrants and holidaymakers.”
Wage growth is also expected to keep increasing, which in theory means people should have more money to service increasing rents.
“I think longer term that will change because we’ll get more investors in the market and more properties being built and that will start to relieve rental pressures,” Ms Owen said.