The cost of renting could jump $5000 in 59 suburbs across the country this year, as Australia sits on the cusp of the worst rental crisis in 230 years, according to Propertyology’s Simon Pressley.
Mr Pressley said the supply of rental properties was at an all-time low, with about 30,000 fewer investment properties than there were five years ago.
He noted low rental supply would add $5000 to the annual household expenses of tenants in Adelaide, Brisbane, Canberra, and Perth.
The other 55 suburbs were in regional areas including Ballina, Orange, Port Macquarie, Wangaratta, Launceston, Cairns, Hervey Bay, Gold Coast, Sunshine Coast, Busselton, and Mandurah.
Mr Pressley said pressure on Australia’s rental market was a direct result of insufficient supply that was getting worse, not better.
In the past five years, the supply of rentals has fallen by around 30,000 properties.
“For perspective, the total national population increased by 1.5 million over the last five years so one would expect a significant increase in the total volume of dwellings advertised for rent over that period,” Mr Pressley said.
“Alas, it reduced from 86,683 in December 2016 to a piddly 57,558 in December 2021.
“Review of official data suggests that, just to maintain balance between annual growth in rental demand and available supply, the size of the nation’s permanent rental pool needs to increase by circa 50,000 every single year.”
The state of the rental market is tighter when Sydney and Melbourne are excluded.
About 15 million people live in the six other capital and 200 regional cities, but there was only 16,896 homes advertised for rent in December, Mr Pressley said.
Five years ago there were 61,980 dwellings for tenants to choose from.
In the past two years, some of the biggest rental increases were in, Ballina, Orange and Port Macquarie in NSW, Wangaratta in Victoria, and Launceston in Tasmania.
In Queensland, rents have already seen sharp rises in popular cities like Cairns, Hervey Bay, Gold Coast and the Sunshine Coast. And in Western Australia, it is locations like Busselton and Mandurah.
Mr Pressley said the rental crisis had been building for years on the back of government taxes and rising costs landlords had been forced to take on.
“This situation did not occur overnight. For several years, Propertyology has consistently expressed concern that a series of regulatory blockages was seriously suppressing rental supply, thereby creating pressure on household budgets of tenants,” he said.
“Getting credit approved has been harder, investors have been whacked with an interest rate loading, state governments have introduced new legislation taking fundamental asset controls away from the away from the asset owner, and city councils keep jacking up rates. There’s only so much juice in the orange.”
Mr Pressley noted there were only ‘two sources of rental supply’ and the burden is on private investors to meet market need.
“There are 2.8 million dwellings that make up Australia’s current rental pool,” he said.
“Only 15 per cent are government-funded (down from 26 per cent in 1991), while the other 85 per cent are privately-funded by 2.1 million everyday Aussie property investors.
“With state and federal governments only adding 3000 of the required 50,000 extra rental properties needed across Australia each year, rental supply is almost entirely dependent upon discretionary funding from private citizens.”
Mr Pressley said since 2015, regulatory actions at federal, state and local government had been counterproductive in supporting supply and things would get worse before they improved.
“Property managers all over Australia continually tell us that lots of landlords are selling out of the market because they’ve had a gut-full of new legislation introduced by state governments,” he said.
“State government restrictions on the investor’s income-earning capacity is discouraging enough, but expenses keep rising. Land tax (state government), council rates (local government), and insurance costs have increased.
“Trade labour and materials to maintain a rental property aren’t getting any cheaper, and there’s interest rate expense which will inevitably rise.”
Mr Pressley said he was concerned the rental crisis could lead to civil unrest, with tenants unable to secure accommodation as landlords sell out.
“Tens of thousands of existing investors are on the brink of throwing in the towel because they are sick to death of being whacked by a piece of four-by-two from governments,” he said.
“Investing is discretionary. Those who think the solution for supplying no less than 50,000 extra rental dwellings every year is to keep squeezing the orange are the cause of this enormous problem.
“They are working against the very obvious solution.
“Rental properties don’t grow on trees. If governments can’t afford to fund them who will?”
Regional cities to rise
The 55 regional cities where advertised rents are likely to increase by $5000 or more this year include: Airlie Beach, Albany, Albury, Ballina, Batemans Bay, Bathurst, Bendigo, Bowral, Bundaberg, Burnie, Busselton, Cairns, Coffs Harbour, Dubbo, Esperance, Geelong, Geraldton, Gladstone, Gold Coast, Gosford, Goulburn, Gympie, Hervey Bay, Kiama, Kempsey, Kingscliff, Launceston, Lismore, Lorne, Mackay, Maitland, Maryborough, Mount Barker, Mount Gambier, Mornington Peninsula, Mudgee, Newcastle, Noosa, Orange, Port Macquarie, Rockhampton, Sunshine Coast, Toowoomba, Torquay, Townsville, Traralgon, Wagga, Wangaratta, Warrnambool, Warragul, Warwick, Wodonga, Wollongong, Yamba, and Yeppoon.
