Since the rental crisis began in the nation’s capital cities back in 2021, it has been the thorn in the side of millions of Australians. Vacancy rates have dropped to historic lows and rents have set off for the moon.
Earlier in the year there was some potential signs that the crisis may draw to a close in the not-too-distant future, as rental vacancy rates began to rise in most capital cities across the nation.
In short, order rental price growth began to moderate, raising hopes that in time the resurgence in sharehousing and more Australians returning home to live with Mum and Dad, would return the market to a degree of balance.
However, recent data from private providers has been far less encouraging. According to data from SQM Research, the rental vacancy rate fell or remained the same in all the state capitals in August. Meanwhile asking rents across the capitals were up 0.2 per cent for the month and 16.1 per cent over the past year.
Louis Christopher, managing director of SQM Research, said: “After the slight easing in vacancies over the first half 2023, this is somewhat of a disappointing result for tenants. Clearly, acute rental shortages remain with us. And besides more people grouping together to share the burden, there is no significant solution on the horizon.
“Australia currently has, by far, the fastest growing population for any OECD country and clearly the rampant increases are currently breaching the country’s capacity to house all our people.”
In their August Rental Market Insight report, Proptrack had similar findings. At a capital city level the rental vacancy rate fell by 0.12 per cent for the month, with all the capitals seeing significant falls with the exception of Darwin.
PropTrack also noted that the trend of rising vacancy rates in regional areas was also drawing to a close, with all states with the exception of Tasmania seeing falls in their vacancy rate.
PropTrack Economist Anne Flaherty: “There are no signs rental conditions are easing, with the vacancy rate now sitting below 1 per cent in three of Australia’s capital cities. Across Australia, the share of available rental properties has fallen by more than half since the start of the pandemic.
“Rents are predicted to continue rising off the back of these incredibly low vacancy rates, which are driving up competition for properties.”
The genesis of the rental crisis
As the way Australians lived and worked changed during the pandemic, and priorities were reassessed, Australia rapidly found itself with too few rental properties even as hundreds of thousands of temporary visa holders in categories likely to require housing left the country. Between September 2019 and September 2021, over 358,000 temporary visa holders in categories likely to require some form of housing left Australia in net terms.
Despite this exodus, the rental crisis had already begun, first in regional areas and later spreading in the nation’s capital cities.
Another challenge arises
The reopening of the nation’s international borders, the resumption of permanent migration and the normalisation of temporary visa holders’ numbers presented a significant challenge for the rental market in 2022. With the number of temporary visa holders in categories likely to require some form of housing eclipsing its seasonal pre-Covid peak in December.
Since then, the number has risen by a further 374,000, to an all-time record high of a little over 2.2 million.
According to the latest ABS population statistics released last week, net overseas migration hit a new record high of over 454,000 on a rolling 12-month basis. Prior to the pandemic the previous record high figure was 300,000, recorded in 2008-2009. Back in October of last year, the Albanese government’s ‘Mid-Year Economic And Fiscal Outlook’ estimated that net migration for 2022-23 would sit at 235,000 and remain there across the forward. This was later revised to 400,000 for 2022-23 in May’s federal budget.
Given the backdrop of already tight rental market prior to the reopening of the nation’s international borders, its perhaps unsurprising that the rental crisis continues to bite amid the highest level of net migration in Australia’s history.
A common but not universal issue
The challenges faced by Australian renters is not a unique one. Across most of the Anglosphere (New Zealand, Canada, Britain), there is a rental crisis in all of the aforementioned nations to varying degrees. But there is an Anglosphere nation that is well and truly the exception to this particular rule, the United States.
According to data from Zillow, a US property portal similar to Domain and Realestate.com.au, US asking rents nationally were up by 3.6 per cent over the prior 12 months. This is significantly below the 6.0 per cent annual wage growth rate recorded by the Atlanta branch of the US Federal Reserve.
What Australia, New Zealand, Canada and Britain share in common is that they are seeing or have seen record levels of net overseas migration. Meanwhile in the United States, migration has surged significantly off its pandemic lows but remains well below record highs.
In Canada, migration and its impact on housing has become a major political issue. In late August, the Canadian Housing Minister Sean Fraser proposed capping the number of international students that were let in each year as a way to help tackle the housing crisis.
Canadian Immigration Minister Marc Miller followed up Fraser’s remarks stating that the Trudeau government would look at its immigration targets to see if it was impacting the housing crisis.
With the improvement seen in rental vacancy rates earlier in the year reversed in recent data releases from the major private providers (PropTrack, SQM, CoreLogic), the rental crisis appears set to continue in the nation’s capital cities for quite some time to come.
With high levels of immigration increasingly a hot political button issue in Canada and Britain, one wonders if Australia will follow them down this path in time, as the rental crisis continues with no end in sight.
Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator