Varying impacts of the rental crunch revealed
The tightening rental market is being felt across the country, with low vacancy rates, high demand and rising rents leaving many tenants feeling frustrated.
The rental vacancy rate nationally sits at just 1%, according to SQM Research, which is a 16-year low. Meanwhile, rental prices are on the rise, with the latest PropTrack Rental Report showing median weekly rental prices have surged across the country by 7% year-on-year.
While some property managers are reporting packed inspections and applicants being priced out of their market, others note that in some areas it’s business as usual, demonstrating that impacts are not being felt evenly in all suburbs.
Priced out of the market
Joy Bianchi is general manager at Ray White Glen Waverley and has worked in the industry for more than 20 years. She said that rapidly rising rental prices are increasingly disqualifying some potential tenants who are struggling to meet the affordability threshold of paying no more than 30% of a monthly household income towards rent.
Many renters are being priced out of their market according to property managers. Picture: realestate.com.au
Low supply and high demand is sometimes seeing frustrations boil over on the ground, she said.
“We had a situation on the weekend where one prospective renter abused our property manager at a property because the renter believed the price was ridiculous. The prospective renter left the premises yelling at other renters not to view the property because the price was too high.
“This is a sign that people are stressed and frustrated.”
Across the combined capital cities, rent prices increased by 4.4% in June, and further hikes are expected as conditions worsen.
Experts warn tenants in Melbourne and Sydney will be the most impacted, with growing populations and increased demand for housing clashing with historically low levels of supply.
Lack of housing supply
Investors are making a slow comeback to the market after selling up big during the Covid pandemic, but the lack of rental supply will be felt for a while yet.
In Sydney, the vacancy rate is sitting at 1.6%, while in Melbourne it’s 1.7% and in Brisbane it is just 0.6%. Regional markets continue to be tightly held, with many areas experiencing a 1% or lower vacancy rate.
Sam Cheli is a property manager at Ray White Lismore and said many prospective tenants in his region who were impacted by floods in February are still looking for a home now, but struggling to find somewhere due to steep competition and limited stock.
The Northern Rivers was experiencing a rental crisis pre-floods. Picture: Getty
“Enquiries are still through the roof,” Mr Cheli said. “It isn’t uncommon to receive 150-plus enquiries and 50-plus applications on a single property.
“What chance does that give these poor people who have lost their homes in the recent flood? That’s why the situation is so dire. There isn’t anywhere near enough to go around for everyone. As a result, many are left homeless.”
However, it hasn’t been flooding alone that has impacted rental stock in the Northern Rivers region.
An influx of renters to the regions during lockdowns, in search of a sea and tree change free of pandemic restrictions, impacted the market drastically.
To alleviate some of the pressure, Byron Shire Council recently received the go-ahead to introduce a 90-day cap on unhosted short-term holiday rentals. It also declared a housing emergency in March 2021.
“Properties were incredibly scarce during the height of the pandemic, we’ve since experienced a record flood, which has effectively wiped out 20-30% of Lismore’s rental market,” Mr Cheli said.
“So if you were finding it hard to secure a property during lockdown, you’ll now find it near impossible to find something post-flood.”
Business as usual for others
While many tenants are facing tough conditions, in some parts of Australia, property managers say it’s business as usual and the market is correcting itself after a COVID-19 lull.
Kristen O’Connell is the business development manager at Jellis Craig Stonnington, Richmond & Surrounds, and said her area is performing comfortably.
“We have certainly seen rents increase, however this is more of a recovering market as we are not seeing rents return to the same as what they were pre-COVID,” Ms O’Connell said.
“There is still a demand for rental properties in our area, however we are not seeing the demand exceed the supply.”
The rental pinch is being felt at varying degrees across Melbourne according to property managers. Picture: Getty
However, while Ms O’Connell’s districts are keeping up with demand, she said her colleagues have been reporting tighter conditions in other suburbs of Melbourne.
Tenants are encouraged to do their research on their preferred neighbourhood to assess the competition.
New data from PropTrack, which shows the areas where tenants face the toughest competition, revealed that tenants seeking a home in Burnley would come up against 160% more potential renters per listing than is typical.
However, by looking just a suburb across in Richmond, the conditions are likely to be much more tenant-friendly where there are 33% fewer potential tenants per listing than the national median.