A recent report by ANZ and CoreLogic has highlighted the growing challenges faced by Australian renters due to an undersupply of rental accommodation and increasing demand. The "ANZ CoreLogic Housing Affordability Report: reflections on the pandemic and the rental market" examines how the pandemic has affected supply and demand in the rental sector.
The report reveals that rental affordability, defined as the portion of income required to service a new lease, is at its highest level since June 2014. Nationally, 30.8 percent of a median income household's earnings are needed for a new lease. For lower-income households, this figure rises to 51.6 percent, indicating significant pressure on those at the 25th percentile income level.
ANZ Senior Economist Felicity Emmett emphasized the importance of considering rental metrics when assessing 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. Paired with a decline in social housing, rental demand pressures are being felt in all income brackets," she stated.
As of April 2023, national rental vacancy rates stood at 1.1 percent, below the decade average of 3 percent. Total rent listings were also down by 38.1 percent compared to the previous decade average.
The pandemic-driven regional migration led to increased rent values and low vacancy rates both regionally and in major cities. Since March 2020, rent values have risen more significantly across regional markets (28.8 percent) than in capital cities (24.4 percent).
CoreLogic Australia's Head of Research Eliza Owen noted extraordinary shifts in rental demand over the past three years due to fewer people per household requiring more dwellings and a strong return of overseas migration. Recently, while regional and house rents have eased, growth has accelerated in capital cities and units.
"As rents have risen sharply, the increase in the cash rate, and pressures in the construction sector have slowed the rate of dwelling completions," Owen explained. "This has meant investor conditions are not ideal and has stemmed the flow of new rental properties to the market."
Although there are signs from ABS lending data that investment borrowing increased through February and March, it will take time for these investments to alleviate pressures on the rental market.
While Hobart, Regional Queensland (QLD), and Regional New South Wales (NSW) face severe strains on rental affordability, Sydney remains Australia's most unaffordable city for home ownership. On average, Sydneysiders need 51.6 percent of their income for a new mortgage and around twelve years to save for a 20 percent deposit—a situation exacerbated by rising building costs—forcing more people into renting.
ANZ and CoreLogic regularly publish reports on Australian housing market affordability.