Down Under Dilemma: The Tightrope Walk between Rental Shortages and Housing Investment

Maria Irene

 

The ongoing rental crunch in Australia’s capital cities paints a complex picture of supply and demand dynamics, investor behaviors, and policy implications. In 2023, it has been predicted that renting in an Australian capital city will become increasingly challenging due to escalating demand and insufficient supply, leading to an upsurge in prices.

Enquiries per rental listing have surged by over a third across Australia’s capital cities, while the number of rental listings has plummeted by 26.3 percent. This juxtaposition is intensifying the pressure on the rental market, with experts asserting that housing investment is the most effective remedy.

Anecdotal evidence of this trend can be seen in the experience of a musician from Brisbane, who was informed that his rent would surge by over 22 percent at the conclusion of his lease agreement, pushing his weekly rent from $440 to $540. This is not an isolated case but indicative of a broader pattern. A report from PropTrack substantiated this growing crisis, revealing that while enquiries per listing have risen by 31.1 percent, the supply of properties for rent remains at its lowest since February 2003. Sydney and Melbourne have experienced the most significant decline in properties available for rent and the largest increases in enquiries per listing.

From December 2021 to December 2022, Brisbane and Adelaide witnessed double-digit rental growth, with Brisbane growing by 11.4 percent and Adelaide by 11.8 percent. Furthermore, rents in capital cities rose by 10 percent year-on-year in December, compared to a 7.1 percent increase for regional areas.

This surge in rental costs is a product of several factors, including a strong interstate migration in Australia, including Queensland, where properties are being bought for residence instead of rentals. Increasing house prices have also contributed to the rental price surge, as landlords are taking the opportunity to sell their investments, thereby reducing the number of properties available for rent.

In response to the crisis, experts have suggested various strategies. The PropTrack report suggests that encouraging more investment in housing could alleviate rental pressures in the short term. One approach is to foster the build-to-rent market, where large investors build large apartment buildings for rent. This would introduce significant supply relatively quickly and offer more stability in terms of ownership. Additionally, Mr. Kusher suggests getting more investors to buy existing residential properties and make them available for rent could be a quicker solution. However, he acknowledges that planning for more supply could take around five years.

Rent control has been a policy implemented by governments in response to soaring rents. While it can provide short-term relief for tenants, it often discourages investment in rental housing over the long term, leading to a decrease in the quality and quantity of available rental properties. Rent control can thus unintentionally exacerbate rental shortages.

The rental shortage in Australian capital cities is a multifaceted issue with no simple solution. The trajectory of rents will depend on how these factors – supply, demand, housing investment, and potential government interventions – play out in the coming years. Future policy decisions will need to carefully balance the interests of renters, landlords, and investors to ensure a sustainable and equitable rental market.

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Maria Irene
Maria Irenehttp://ledgerlife.io/
Maria Irene is a multi-faceted journalist with a focus on various domains including Cryptocurrency, NFTs, Real Estate, Energy, and Macroeconomics. With over a year of experience, she has produced an array of video content, news stories, and in-depth analyses. Her journalistic endeavours also involve a detailed exploration of the Australia-India partnership, pinpointing avenues for mutual collaboration. In addition to her work in journalism, Maria crafts easily digestible financial content for a specialised platform, demystifying complex economic theories for the layperson. She holds a strong belief that journalism should go beyond mere reporting; it should instigate meaningful discussions and effect change by spotlighting vital global issues. Committed to enriching public discourse, Maria aims to keep her audience not just well-informed, but also actively engaged across various platforms, encouraging them to partake in crucial global conversations.

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