Australia is in the middle of a rental crisis.
And there is no relief in sight for tenants with tight rental markets continuing to push rents up for both houses and units in our capital cities.
The news is full of stories about spiralling rents forcing families into secondary accommodation or even social housing where the waiting lists are even worse than private rentals.
Watch this week’s Property Insider chat where Dr Andrew Wilson and I discuss his My Housing Market Rental Report.
We also discuss the latest job vacancy data and get a recap of what’s happening to house prices now that we are halfway through the calendar year.
Here’s what’s happening in the capital cities' home rental market
The rental crisis shows no sign of easing, with vacancy rates dropping to their lowest point nationally since April 2006.
Capital city house rental prices rose 15.6 per cent in the last 12 months at a time when there are a lot fewer properties on the market for rent at present, but a lot more people looking for rental accommodation.
Many investors sold up over the last few years and most buyers have been 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 Airbnb and similar platforms.
And the problem is only likely to be exacerbated as international and domestic borders reopen post-Covid.
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’s unlikely that there is any significant relief on the way – things will only get worse before they get better.
While investors are slowly coming back into the market, they're not returning in large enough numbers to significantly increase the supply of rental stock
And we’re not building enough new apartments.
In fact, an increasing number of “shovel-ready” housing projects are being abandoned in response to soaring construction costs, jumping interest rates, uncertain end values and a pullback in development finance.
The national weekly median asking house rent increased by 2.6% over June to $551 for an annual increase of 15.6%.
Canberra continues to report the highest capital city weekly house rents again steady at $700 over the month followed by Sydney and Darwin each continuing to rise sharply to $670 and $650 respectively.
Melbourne remains the most affordable capital for weekly house rents steady over June at $480.
Capital city unit rents also continue to maintain the strong gains recorded over the past year with monthly increases reported by Hobart up 6.0%, Brisbane up 2.2% and Adelaide higher by 1.3%.
Sydney unit rents have been the top performers over the past year higher by 22.2% followed by Hobart up 17.7% and Melbourne up 13.5%.
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Capital city vacancy rates for units over June generally remained low at just above 1.0%, and although Melbourne and Sydney's results are above 2.0%, rates continue to fall and are significantly below the levels of a year ago.
Similar to houses, Canberra again reported the highest weekly asking rents for units over June but higher at $560, with Adelaide the most affordable but also increase over the month to $385.
The current strong demand for rental homes will continue to be supported through 2022 by the reopening of borders with the return of high levels of migration and surging international students.
Higher mortgage interest rates for investors are also likely to be passed on to tenants providing more upward pressure on already high and generally rising rents.
Sydney and Melbourne down following 2 years of growth
Sydney and Melbourne house prices are now falling as sharply higher interest rates reduce already low affordability and impact market confidence.
Although other capitals are still recording robust price increases, growth levels have declined significantly from the peaks of recent quarters.
Australia records just 1.1 unemployed persons per job vacancy, a record low
Australia’s staffing shortage crisis has worsened with almost half a million jobs available meaning the number of vacant positions is now nearly equal to the number of unemployed.
Job vacancies surged again in the three months to May to be up 13.8% quarter on quarter and are more than double their pre-pandemic levels (+111% on pre-pandemic levels).
The sheer volume of job vacancies means that even as higher inflation and rising interest rate curtail demand growth, it will take time for this to push up our unemployment rate.
This also means it is likely that unemployment could even be at the low 3's" this year and stay there throughout 2023.
Of course, this very low unemployment rate is an important reason why the Australian economy is likely to remain resilient in the face of high inflation and interest-rate.
This weekend’s auction clearance results Saturday, July 2nd – clearance rates holding steady over the school holidays
Auction clearance rates held their own this weekend being much the same as last week, but there were significantly fewer properties for sale by auction than normal in part because of the school holidays.
But with the media being full of negative messages again this week buyers remain cautious and vendors are also losing confidence fast, with auctions being cancelled or withdrawn from sale.
At the same time, more homes are being sold before auction as sellers rush to make a deal rather than risk not getting a sale as vendors are becoming less willing to test the marketplace under true auction conditions.
Other properties are being passed in at auction but selling straight after negotiation with the vendor post-auction.
The auction clearance rate doesn't always reflect this.
However, it is likely that we'll see further falls in the auction clearance rates moving forward reflecting weaker buyer confidence, poor affordability and rising mortgage rates.
Dr Andrew Wilson of My Housing Market reported a national auction market clearance rate of 64.2% this weekend, which was a little lower than last weekend’s 65.4% and significantly lower than the 79.8% recorded on the same weekend last year.