Australian renters are set to face the “limits of affordability” as new data shows national vacancy rates slipped again in February.
PropTrack’s latest market insights report, published on Saturday morning, reveals the rental market has reached a grim new milestone – there are only half as many available rental properties as there were pre-COVID.
The national vacancy rate has slipped again to 1.47 per cent, the lowest level since 2018, with the worst of the crisis felt in major cities.
In fact, PropTrack senior economist Paul Ryan said it’s now harder to find a rental in a major capital than in regional Australia for the first time since the pandemic.
“These numbers show just how difficult the rental market is at the moment,” Mr Ryan told.
“It’s everywhere, every single market across the country is really, really tight.”
Mr Ryan said such low vacancy rates suggest the days of double-digit rent increases – with some suburbs across Australia having seen prices skyrocket more than 40 per cent – will continue throughout 2023.
“Anything below 2 per cent [vacancy rates] is pretty tight, and is consistent with strong rental price increases,” he said.
“The shake-out here is going to get to the limits of affordability for a lot of renters.
“Before the pandemic 43 per cent of advertised rents on our website were below $400 a week – now that’s below 18 per cent.”
State-by-state: Vacancy rates
The national rental vacancy rate has now plunged 55 per cent since March 2020, PropTrack’s latest figures show.
Vacancy rates are currently lowest in Perth at 0.85 per cent, followed by Adelaide at 0.92 per cent and Hobart at 1.28 per cent.
Australia’s three largest capitals, Sydney (1.7 per cent), Melbourne (1.4 per cent) and Brisbane (1.3 per cent) aren’t much better – all three of these cities saw vacancy rates decline.
What’s interesting is that vacancy rates in regional Australia actually ticked up, rising 0.02 per cent in a sign that pressure in those markets is starting to abate, albeit extremely slightly.
Vacancy rates across regional Australia are still 41 per cent lower than before the pandemic.
Mr Ryan said a shortage of rental housing is driving the low vacancy rates, particularly in the wake of COVID-19 partly because many share houses broke up and haven’t reformed yet.
“One of the big trends we saw in rental markets is that households broke apart during the pandemic, there are now more one person households,“ Mr Ryan said.
“Share houses broke apart as lower rents in the city meant people could get their own places.”
Those one person households are now starting to consolidate again as rents rise, Mr Ryan said, but the process doesn’t happen overnight.
“That adjustment going back is taking a long time,” he said. “As affordability pressures grow people are joining back together to form more share houses … but it’s difficult to do with little stock on market.”
Higher migration in the wake of COVID-19 is also one demand-side factor driving the rental vacancy rate lower.
But the supply-side is where Mr Ryan said more action is needed, with too few homes on the market and the construction sector struggling.
