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A bleak outlook for tenants with rising rentals - featured image
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A bleak outlook for tenants with rising rentals

It’s tough out there for tenants.

There’s a shortage of rental properties available, both houses and apartments, with intense competition for the limited supply driving up rentals around Australia.

And there’s no relief in sight.

A bleak outlook ahead for tenants | Yahoo Finance

According to Dr Andrew Wilson’s My Housing Market, the already low vacancy rates continued to fall over May, driving rents even higher.

The national weekly median asking house rent increased by 16.8% over the past year to $537, with the May house vacancy rate steady at 1.2%.

Median Asking Rents May 2022

Dr Wilson reported that vacancy rates for houses were at record low levels in Sydney causing rentals to surge by 25.8% over the year.

On the other hand, Brisbane continues to report the most affordable weekly house rents, but even these have increased by 7% over the year.

Apartment rents also rising

Unit rentals have also recorded strong increases with apartment rents up 16.1% over the last year as decreasing housing rental affordability has forced many tenants to consider apartment living.

Median Asking Rents Units May 2022

Why are rentals growing so strongly?

It all has to do with supply and demand, and at present, the competition for rental accommodation is high with tenants having very little choice with a number of available rentals trending lower month by month.

Why is supply so limited?

It all started in 2017 when APRA restricted funding to investors, meaning the number of investors providing rental accommodation decreased.

Then during the pandemic era of 2020 and 2021, many investors sold up and, in general, owner-occupiers purchased their properties further decreasing the stock of rental properties.

Tenants

However, during this time the average household size got smaller as many young renters fled share houses for the “safety” of one or two-bedroom apartments.

And more recently, with our borders reopening and tourism increasing, many properties that had been put into the long-term rental pool are now back on Airbnb, thereby lowering the number of properties available for long-term tenants.

What’s ahead?

Rental demand doesn’t look likely to ease any time soon, particularly with our borders reopening and international students returning, filling the once vacant CBD apartments.

And most immigrants coming to Australia rent for a few years until they get their bearings in their new homeland.

Also…many potential first home buyers will remain tenants for longer as inflation and the rising costs of living, including soaring rents, eat into their ability to save a deposit.

Home Buyers

On the supply side, more investors are coming into the market, but the real challenge ahead is that building approvals for new apartment complexes are dropping.

And to make things worse, many of the apartment complexes on the drawing board will not get out of the ground as they are now unprofitable due to steep cost and price increases, and interest rate hikes at a time our housing markets are entering a correction phase.

So while it’s a bleak time for tenants, property investors can look forward to rising rental returns.

About Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au
2 comments

The property market moves in cycles and clearly 25%+ gaines a year unsustainable. So there will be a period of lower growth and then a period then the value of some properties will fall. But if you're a long-term player there's no reason to sell up, ...Read full version

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Brisbane house prices have gone up north of 25% in the last 12 months. Rentals 7%. That doesn't help people who have find ever increasing rents on stagnant incomes, but net (not gross) rental return on Brisbane residential housing is way below 2%, an ...Read full version

1 reply

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