Australia’s property market has experienced unprecedented demand over the past couple of years and despite the market now cooling, rising costs and supply shortages are causing one of the worst housing crises in history.
We’ve heard and read stories about entire families forced to live out of their cars, in campervans, and even tents.
Many have a respectable and reliable income and a rental history to boot.
But when prices reached an all-time high the surge of investors selling off their properties, and in general to owner-occupiers, forced many renters out of their homes at a time when securing a new rental property is arguably harder than buying one.
So it came as a shock to many to hear that the recently released Census data revealed that while so many are unable to find a home, almost one-in-10 houses were vacant on Census night.
There were nearly 11 million (10,852,208) private dwellings counted in the 2021 Census, up from 950,712 in 2016.
And the data showed that 1,043,776 of those have nobody living in them.
But maybe that shouldn’t really come as a surprise.
Remember the Census was conducted in late August last year when many of us were in lockdown, meaning a lot of Aussies couldn’t go on vacation so there were a lot of holiday homes and Airbnb properties vacant.
It seems that at the time there were also many unoccupied investment properties.
But surprisingly the share of homes that were unoccupied on Census night fell to a 15-year low.
While 10.1% of homes were unoccupied on Census night in 2021, that’s a sharp fall from the 11.2% that were empty in the previous Census in 2016 and is the lowest share of unoccupied properties since 2006.
You see…because a property was vacant on Census night doesn’t really mean it is genuinely empty - people may be in hospital, away on a business trip, or staying in their partner’s house.
Then there are truly unoccupied properties such as those for sale, newly completed homes, or those awaiting demolition.
Interestingly the Census found 58,155 people were living in caravans on Census night and 29,369 were living in houseboats.
Empty homes were more common in regional areas than in capital cities, and the Northern Territory had the greatest proportion of unoccupied dwellings - 12.8 per cent (down from 14.1 per cent in 2016), followed by Tasmania with almost 11.8 per cent (down from 14 per cent in 2016) and Victoria with 11.1 per cent (down from 11.7 per cent in 2016).
The location with the smallest proportion of unoccupied dwellings was the ACT with 6.6 per cent (down from 8.1 per cent in 2016).
The other states had figures around 9 and 10 per cent.
The Census also revealed that the proportion of people who own a home outright dropped to 31.0% in 2021, from 41.6% in 1996.
Longer-term, ABS deputy Australian statistician Teresa Dickinson said the share of homes that are owned with a mortgage, rather than outright, has been growing.
“Over the last 25 years the number of homes owned outright has increased by 10% while the number owned with a mortgage has doubled,” she told a media conference in Canberra.
At a national level, fewer borrowers reported being in mortgage stress – defined as spending more than 30% of their income on mortgage repayments.
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One in seven (14.5%) households spent more than 30% of their income on home loan repayments in 2021, compared to one in five (19.3%) in 2016.
Of course, a lot has changed in the property market since the Census data was collected.
Interest rate hikes have made borrowing more expensive while a crackdown on lending requirements has also made it more difficult to secure a home loan.
Capital city rental supply tightened by a further 5.4% last month in May, totalling an astonishing 54% slump since May 2020, according to the latest Domain Rental Vacancy Rate Report.
Vacancy rates around the country now sit uniformly at crisis levels, ranging from a critical 0.3% in Adelaide to 1.6% in Melbourne.
And the worst is yet to come.
Record-high asking rents and reduced choice in rentals resulted in tightening conditions that continued to favour landlords and increased the likelihood of rental price rises after the reduction in rental prices seen during Covid, the report explained.
The dearth of new apartment developments, the arrival of overseas migrants, and the return of international students will see rental demand remain elevated, worsening conditions for tenants.
Simply there are a lot fewer properties on the market for rent, at a time when a lot more people looking for rental accommodation.
It’s really just supply and demand.
Many investors sold up over the last few years and most buyers were owner-occupiers.
At the same time, other investors are taking their properties out of the long-term rental pool and moving them into short-term accommodation through platforms like Airbnb.
And the problem is only likely to be exacerbated as international and domestic borders reopen.
Further compounding the problem is the fact that household sizes have been shrinking as more tenants who previously shared accommodation are now working flexible hours from home and have started looking for their own accommodation realising they can’t easily work with many other people around them.
It is a bleak time for tenants facing short supply and higher prices as the rental crisis continues to deepen, particularly in our capital cities.
And while property investors can look forward to rising rental returns, it’s important to remember that as an investor, your future income is dependent upon your tenants’ abilities to pay you increasing rent over time.
That’s why it’s important to own properties in the right suburbs- those where the tenants will be able to afford higher rents over time rather than suburbs where the tenants are only a week or two away from going broke.
In general, these will be locations where tenants are aspirational and have a good income, and are likely to have increasing income over time so they can pay you more rent.