Surging immigration and fewer people per home has seen rental affordability fall to the lowest level in eight years, according to a new report.
The ANZ CoreLogic Housing Affordability Report found households in many locations were paying more than 50 per cent of their income on rent and families were under extreme financial pressure.
The report showed that on average, households need to use 30.8 per cent of their income to service a new lease nationally for a median-income household, up from 28.5 per cent in June 2020.
However, the situation is far worse for lower-income households where 51.6 per cent of income was required.
The report found rental affordability was most strained across Hobart (59.8 per cent), regional QLD (55.7 per cent) and regional NSW (56.9 per cent), where renters are expected to pay the majority of their income on a new lease.
While rents are most affordable for new leases in Darwin (37.9 per cent), the ACT (40.9 per cent) and Melbourne (44.3 per cent).
According to the report, an increase in regional migration during the pandemic led to increased rent values and low vacancy rates in both regional Australia as well as major cities.
Since March 2020, rent values increased more across regional markets at 28.8 per cent, compared to 24.4 per cent in capital cities.
CoreLogic Australia Head of Research Eliza Owen said rental demand had seen some extraordinary shifts in the past three years, with fewer people per household requiring more dwellings coupled with a strong return in overseas migration.
“More recently, rental growth has eased across the regions and houses while ramping up in capital cities and units,” Ms Owen said.
“As rents have risen sharply, the increase in the cash rate, and pressures in the construction sector have slowed the rate of dwelling completions.
“This has meant investor conditions are not ideal, and has stemmed the flow of new rental properties to the market.
“Through February and March, ABS lending data has shown signs of an increase in investment borrowing, but it will take some time for a supply response to ease pressures in the rental market.”
The report found that rental vacancy rates as of April 2023 were 1.1 per cent nationally, well below the decade average of 3 per cent.
In the same period, total rental listings were 38.1 per cent below the previous decade average.
ANZ Senior Economist Felicity Emmett said it was important to factor in rental metrics when looking at housing affordability in Australia.
“Heightened economic uncertainty has seen a decline in sales volumes in the private market and an increase in those seeking rental accommodation,” Ms Emmett said.
“Paired with a decline in social housing, rental demand pressures are being felt in all income brackets.”
The report also found that Sydney is the most unaffordable market for home ownership.
Sydneysiders on average require 51.6 per cent of income to service a new mortgage, and around 12 years to accumulate a 20 per cent deposit.
Higher building and construction costs are also pushing more people out of the housing market, increasing rental demand.
