Maria Irene
As the old idiom goes, “No one promised that life would be fair.” Still, for many Australians seeking shelter from the elements, the inherent injustice and inefficiency of the current rental and housing market landscapes may seem particularly cruel and hard to digest.
The relief of a slight deceleration in rental growth rates, as reported by CoreLogic’s Quarterly Rental Review for Q2 2023, is little more than a façade. While the numbers reveal a quarterly rental growth of 2.5%, on par with the March quarter increase, this trend does not serve to alleviate the pressure on renters.
This reduction, according to CoreLogic Economist Kaytlin Ezzy, is not an indicator of improved affordability or easing demand but rather a testament to the strain on Australian tenants, who are bearing the brunt of a 27.4% surge in national rents since the advent of the COVID-19 pandemic.
As the nation confronts a shortfall of approximately 47,500 rental listings, a 32.4% decrease compared to five years prior, the spectre of chronic undersupply has taken the stage. Concurrently, vacancy rates have plummeted to a new low of 1.2%, starkly contrasting the pre-COVID decade average of 3.3%.
This landscape of scarcity and surging demand is further complicated by the fact that rental rates for unit accommodations continue to rise. Despite a decreasing gap between median house and unit rents, unit rents have experienced an accelerated growth rate of 3.6% over the June quarter.
These figures are telling; renters are willing to pay a significant price for smaller living spaces in an attempt to stay afloat amidst rising rental rates. But, downsizing dreams are turning into claustrophobic nightmares, as tenants find themselves crammed into shoebox units that come with a less than modest price tag.
The rental crisis resonates on a broader spectrum, with the entire housing market showing signs of instability. The Victorian Managed Insurance Authority (VMIA) recently announced a massive 43% increase in Domestic Building Insurance (DBI) premiums from September 1, 2023.
This surge in premiums, seen as a knee-jerk measure to stabilise the DBI scheme’s financial performance, has sent ripples of unrest among Victorian home builders and buyers. It’s yet another layer of financial strain on an industry already grappling with rising material and labour costs. Home builders and their clients feel cornered into a market that continues to become more demanding without providing increased benefits or security.
Adding to the turbulence are recent corporate collapses. Luxury builder Millbrook Homes and residential construction firm Bentley Homes have both folded, leaving a slew of creditors in the lurch and numerous housing projects incomplete.
The bankruptcies of these companies are symptomatic of a wider crisis in the building industry, driven by supply chain disruptions, labour shortages, spiralling costs, and unpredictable weather events. The subsequent effect on the Australian housing market is worrying.
The conditions outlined paint a bleak picture for the Australian rental and housing markets. It begs for immediate attention and reform from all stakeholders – the government, industry regulators, builders, and renters alike. The dream of affordable living shouldn’t be reduced to the nightmare of residing in an overpriced shoebox or in the shadow of a teetering castle.
Yes, no one promised that life would be fair, but there’s something to be said for striving for balance, especially when it comes to something as fundamental as shelter. As the housing market fluctuates and rental rates soar, one thing is abundantly clear: Australia’s housing story needs a fresh chapter, written with the ink of empathy, reform, and innovation.
