The continuing apartment shortage and rental risis in Australia

It's old news that Australia is currently experiencing a significant shortage of apartments and a corresponding rental crisis.

And renters should not expect a reprieve from upward rental pressure anytime soon as the pace of apartment-building has slowed.

According to a report by International Agents JLL, the supply pipeline of inner-city apartments has dropped by 8% compared to last year.

This decrease is attributed to the scarcity of construction labour and high costs resulting from recent builder failures.

Additionally, developers are now favouring less risky infrastructure projects over high-density residential construction.

Source: JLL

This situation is a result of various factors, including a slowed pace of apartment construction, a surge in population growth, and shifts in the rental market dynamics.

The AFR reported JLL senior research director Leigh Warner saying"

For the already tight rental market, there appears little relief on the horizon from new stock, so upward rental pressures are likely to continue for some time.

The pipeline’s been shrinking for quite some time.

All we’ve seen in the last quarter is a few projects being reactivated and some recent DAs for more density.”

Nationally, there's been a 30% drop in the number of apartments being marketed compared to the previous year.

This decline indicates fewer build-to-sell projects progressing to construction, suggesting that apartment supply is likely to remain flat or even decrease further​​.

In turn the rental market has seen a significant price increase, with nationwide vacancies at all-time lows and rental prices up by 30% over three years.

This situation has forced many tenants into tough decisions, such as downsizing or moving into shared housing​​.

Implications of the Shortage

The escalating rental prices are contributing to the country's inflation, with rent being one of the major drivers.

The Reserve Bank of Australia notes that rent inflation is expected to peak at an annual rate of 10% in the upcoming quarters before easing.

However, the current high rental prices are causing resistance in the market, potentially altering demand patterns​​​​.

This means many tenants, especially in cities like Sydney, have been priced out of houses.

Their affordability ceiling is being tested, and tenants are making difficult choices, often at the expense of their living standards and financial stability​​.

Conclusion

The apartment shortage and rental crisis in Australia present complex challenges that require multi-faceted solutions.

As these issues impact a significant portion of the population, there are many calls for urgent and effective action is to ensure a level of affordability and stability for Australian renters.

However with our strong immigration levels and minimal new supply I can't see an end to the rental crisis in sight any time soon.

In fact Louis Christopher's SQM Boom and Bust report forecasts that overall capital city asking rents will rise by between 7% to 10% next year.

About Leanne Jopson Leanne is National Director of Property Management at Metropole and a Property Professional in every sense of the word. With 20 years' experience in real estate, Leanne brings a wealth of knowledge and experience to maximise returns and minimise stress for their clients.