The costs of Australia’s rental crisis are often measured by the sharp decline in the rental vacancy rate, which is tracking at historical lows, alongside the strong rise in advertised rents.
According to Cotality, advertised rents have risen by around 50% since the end of 2019, adding more than $12,000 to the annual cost of renting the median Australian home.
However, one cost that is rarely considered is that the sharp erosion of rental affordability is forcing Australian tenants to live in group homes, lowering their standard of living.
SQM Research managing director, Louis Christopher, told The AFR that tenants were increasingly bunching up to save on rental costs amid record low rental affordability.
“What this amounts to is still a drop in standard of living”, Christopher said. “People don’t want to share unless their budget dictates they have to”.
Domain chief economist Nicola Powell said that rents had hit the limits of what tenants could pay, driving them into group homes.
“When a tenant runs out of capacity to pay for a home and has the inability to pay more, they shift”, Powell said.
“The transient nature of the rental market becomes evident. People come to house shares, they shift to a cheaper property type or a more affordable location. A single parent is going into a one-bedroom apartment because they can’t afford two bedrooms”.
Charter Keck Cramer’s national director, Richard Temlett, claimed that the rental market was experiencing “demand destruction” as tenants were unable to pay more and withdrawing due to affordability constraints.
Temlett added that new housing supply isn’t being added quickly enough, which will ultimately result in rents continuing to rise.
“What’s alarming is supply is taking a long time to get delivered”, he said.
Temlett doesn’t have to wait for rents to rise, given that Cotality’s advertised rent series has reported rising growth of 5.9% in May – nearly double wage growth.
Historically low rental vacancy rates and rising rental growth are forcing tenants into group housing.
They are the true victims of Australia’s housing market.
