How more renters will be sharing their digs to afford rising rents
Rising rents mean tenants will try to “maximise their occupancy”, according to property research company CoreLogic’s Tim Lawless. What does the rest of the year look like for renters?
Residz Team 3 min read
For a time in my twenties I rented a large house with five strangers. It ran like clockwork thanks to a self-appointed leader who kept a strict roster for meals, cleaning, and taking out the rubbish. Benefits were an instant social life in a new city, cheaper rent, and only having to cook once a week.
I was lonely and liked my flatmates, so this full-to-bursting share house fitted the bill for me, but that’s not always the case. You only have to read John Birmingham’s book “He Died With a Felafel in His Hand” about sharing cheap rentals in Brisbane, Sydney and Melbourne during the nineties to know that. But renters may no longer have a choice.
A reversal of the pandemic trend for smaller rental households
Having space to yourself or as a couple is rapidly becoming too expensive. Group houses may have to increase, as the number of properties-for-rent dwindles and rents keep rising.
Tenants will probably seek to “maximise their occupancy”, says property research company CoreLogic’s Tim Lawless, revealing new data showing rents continue to surge around Australia, rising nearly 10% in 12 months.
“Logically, we will probably see a reversal of the pandemic trend towards smaller rental households as tenants look to maximise their occupancy, and spread rental costs across a larger household,” he said in a recent news release.
Rents rising faster than interest rates over past 12 months
The data showed rents continuing to trend higher through July, rising 0.9% nationally over the month to be 2.8% higher over the rolling quarter, and 9.8% higher over the past 12 months.
A visual representation by economist James Foster is below.
Source: James Foster, Twitter
Rising fastest are rents in the more affordable unit sector, as tenants look for cheaper rental options. The rental situation is dire in Brisbane. The city poised to host the 2032 Olympics has experienced a 4.2% rental rise over the three months to July, with the lowest vacancy rates in a decade of under 1%.
No room at the inn
“Rental markets are extremely tight, with vacancy rates around 1% or lower across many parts of Australia,” says Tim Lawless. “The number of rental listings available nationally has dropped by a third compared to the five-year average, with no signs of a lift in rental supply.”
Mr Lawless says it is likely demand will continue to increase as overseas arrival numbers climb.
“Such widespread and rapid rental growth is likely to remain one of the key domestic factors pushing up inflation, along with construction, food, transport and energy costs,” he says. “While some of these can be attributed to global supply chain issues, the rental situation is a domestic one caused by a combination of tight supply and amplified demand.”
Australia’s inflation at 6.1% and expected to go higher
It’s a vicious circle where renters are being hit with the double whammy of rising rents and rising inflation.
At the moment Australia's Consumer Price Index (CPI) is at 6.1%, marking a decades-high inflation rate rise. (ABS).
The Reserve Bank of Australia (RBA) has attempted to curb inflation with three consecutive interest rate hikes, taking the official cash rate to 1.35% (up from 0.1% in April).
Those rate hikes and inflationary pressures will push investors to increase rents, and so on it goes.
A helpful note if you’re selling a home, buying one, or just love learning about real estate; make sure you download a free property report from Residz.
Photo by Nathan Dumlao on Unsplash