What is happening in the current rental market?
After the 7th consecutive interest rate hike of 2.85% by the Reserve Bank of Australia, it’s no surprise that many people are concerned about the rental market- and rightfully so. With a combination of inflation, interest rates, covid and immigration, we are expecting rental prices to continually rise with vacancy rates to stay consistently low.
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RENT ON THE RISE
Across the states and territories of Australia, apartment rent has seen an apparent increase.
Adelaide experienced the highest annual change in rent with an increase of 11.4%, which was a median amount of $390 for rent per week as of September 2022. Conversely, the ACT had the highest median weekly apartment rent, which sat at $550 per week, followed by Sydney, whose median rent was $520 weekly, being an 8.3% annual change increase.
LOW VACANCY RATES
When looking at all available rental properties, we can see that the already low vacancy rate has dropped even further. Across Australia, the vacancy went from 1.3% in June to 1.1% in September – making it the lowest vacancy rate on record.
More specifically, Sydney’s vacancy rate has dropped to a decade low of 1.3%, whereas Melbourne dropped to 1.4% – which is the lowest it’s been in 4 years. Additionally, all other capitals had vacancy rates of under 1% – signifying a significant demand for rental properties all across the country.
These low vacancy rates can be attributed to the current lack of output the country is currently experiencing in housing supply- in addition to increasing demand for property.
Source: SQM Research
WHY IS THERE A RENTAL CRISIS?
Australia is currently facing a rental crisis. This is because of the current mismatch between supply and demand.
We are currently seeing a severe low in construction commencements. This can be seen across Sydney with 7,100 apartments due to be complete this year (2022) – a minuscule number in comparison to the 28,000-30,500 apartments that were complete in 2017.
In addition to the limited construction commencements, construction costs have been on the rise too. As a result of construction materials being more expensive and harder to obtain, many developers are holding off and not building as many properties as they had in previous years.
Now looking at the other side of the coin, with the global pandemic stabilising and the Australian borders opening up, there has been an influx of migration. Currently, Australia needs more workers, which is why there are and will continue to be many skilled migrants entering the country – along with an increased number of international students. As these migrants enter the country, they are most likely to rent an apartment in comparison to purchasing one. As a result, this will continue to place upward pressure on the demand for rental properties.
Currently, we are experiencing a rental crisis because our supply is not keeping up with Australia’s growing demand for rental properties. With this increasing demand, landlords have now been able to increase rental prices as prospective tenants are becoming more willing to pay increased rent in order to secure a property.
As a result, this has left many tenants having to accept these higher prices as there aren’t many other options available for them.
WILL RENT PRICES GO DOWN IN 2022?
Looking at rental prices, it is expected that they will not be going down by the end of 2022 or anytime soon. With inflation still high, interest rates are expected to reflect this and continue to climb into 2023 too. Additionally, with the current supply situation, there will continue to be an upwards trend in demand with growing pressure from the number of migrants entering the country.
SO HOW CAN THIS BENEFIT YOU?
It’s no surprise that rental prices are increasing.
For current renters, it’s time to consider purchasing your own property and start the journey on the property ‘ladder’. Buying a property will give you the benefit of growing equity in your property to begin securing your financial future.
With affordability being a significant factor for many Australians who are looking to purchase property, apartments are the more favoured option. This can be found true for many young Australians, skilled migrants and international students.
For those considering investment, it’s time to jump into the property investment market. Secure a property now, and reap the benefits of rising rental income, along with growing equity to begin securing your financial future.
Don’t think you have enough saved to purchase a property?
Purchasing an off-the-plan apartment with St Trinity starts from as little as a $10K deposit! These apartments will let you secure the apartment price now and give you more time to increase your savings – where you only start paying off the loan once the apartment has settled.
To learn more about purchasing a property, enquire below & chat to our team.