Those in the rental sector of the property market, a growing proportion of the population, are in the crosshairs of the affordability crisis. Indeed, as discussed in my live show on Tuesday, around 76% of those renting have a cash-flow deficit, or are in rental stress.
The latest data from the ABS reported that Rental prices Rental prices rose 6.4 per cent over the 12 months to the December quarter, down from 6.7 per cent in the September quarter. Rental price growth continues to reflect low vacancy rates and a tight rental market. However, the September quarter results showed a partial impact of the CRA changes, while the remaining impact has been reflected in the December 2024 quarter. Excluding the changes to CRA, rents would have increased by 7.8 per cent over the 12 months to the December 2024 quarter.
The recent headlines about Australia’s rental crisis is easing on the back of data from both the ABS and CoreLogic. “Finally, renters are seeing some relief after a period of extreme rental growth,” Tim Lawless said. “Over the past five years capital city rents have surged by 37%. The previous five-year period saw rents rise by just 5%.”
And to cap it all, according to a recent Yahoo Finance article, some rental properties in Sydney and Melbourne are offering free rent to try and entice new tenants, as the market passes its recent boom.
Let’s be clear, the data shows that growth in rents is moving up faster than overall CPI, which is falling, somewhat, and real wages growth. So, can we really say things are improving in a sustainable way?
Now, SQM Research managing director, Louis Christopher said the sharp decrease in rental vacancies strongly indicated Australia’s rental market crisis was not over and could deteriorate further. “It looked like there was an easing in the vacancy rate at the end of 2024 and we were coming out of the rental crisis, but that’s not the case now,” he said.
“Could there have been another surge in migration levels in recent weeks? We don’t know for sure but clearly something has driven this retreat in rental vacancies”, Christopher said.
If the federal government continues growing the population faster than new homes can be built, the rental market will remain tight. The number one solution to Australia’s rental crisis is to significantly lower net overseas migration to a level compatible with the nation’s ability to build housing and infrastructure.
But don’t expect to hear that as a policy platform in the upcoming election, because more people flooding into the country is the only way to avoid a real recession. Expect the rental crisis to continue and Australian tenants to bear the brunt.
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