CoreLogic has released its September housing market results, which shows that the nation’s rental vacancy rate has collapsed to a record low 1.0% across the combined capital cities and 1.2% across the combined regions:
Source: CoreLogic
“Rent markets remain tight pretty much everywhere”, CoreLogic director of research, Tim Lawless said.
“The pre-COVID average for capital city vacancy is 3.1%. To see some cities with a vacancy rate persistently at sub 1% levels is alarming to say the least”.
“No doubt there are a broad range of negative social outcomes stemming from the undersupply of rental housing, the worst being increased rates of homelessness and rough living”.
The only sliver of good news is that the growth in asking rents continues to decelerate.
National rents increased by 0.7% in September taking rents 6.4% higher over the first nine months of the year and 8.4% higher over the past 12 months.
The quarterly rise in rents throughout the combined capitals was 1.9% in the September quarter, down from 2.7% in the June quarter and 2.9% in the first quarter of the year.
Although annual rental growth has peaked, it remains extraordinarily strong at 10% over the last 12 months across the combined capitals.
Source: CoreLogic
Tim Lawless notes that the slowdown in rents amid record low vacancies seems counterintuitive, but is explained by a rise in group housing as renters hit affordability constraints:
“This is probably a signal that rental affordability constraints are forcing a structural change in household formation as group rental households re-form and renters seek to maximise their tenancies in an effort to spread rental costs across a larger household”.
“Data released by the RBA earlier this year clearly shows a rise in average household size following a drop in the average number of persons per household during the worst of the pandemic”.
So, renters are nearing their financial limits, as evidenced by the large increase of tenants living in group housing.
The outlook for Australian renters remains bleak given dwelling construction rates are trending lower as population growth has surged to record levels, and is projected to remain high going forward:
SQM Research managing director, Louis Christopher, warned recently that Australia faces a “very large increase in homelessness” as immigration demand continues to outstrip housing supply:
“Going forward, I expect the low rental vacancy market to be maintained. In response to shortages, housing formation will continue to contract and unfortunately, I am expecting a very large increase in homelessness”.
Rents in Australia will continue to rise faster than wages for the foreseeable future, as record immigration-fueled population growth outpaces housing construction.
This decade is shaping up as a shocker for renting Australians, thanks to the Albanese government’s unprecedented immigration policy.
