For several generations, 1 in 3 households in Australia have been rented. Until recently, it was a relatively simple process with mutual respect between tenant and landlord.
Unfortunately, Australia totally lost its way regarding the provision of shelter over the last 7-years.
This country with more land and wealth than most countries across the globe currently has insufficient rental accommodation in each of the 8 capital cities and 400 regional communities. Insane.
Governments have created an unsavoury Us-versus-Them culture between landlords and tenants. Their policies have had the goal of winning votes by diminishing asset ownership controls and raising revenues to prop-up government budgets with bulging debts.
We’ve become a tall-poppy society wherein persistent punishment of aspirational actions is now directly responsible for a country that, despite an abundance of land and revenues, does not have enough accommodation for renters.
Here’s a summary of the poor property policies since 2015 that collectively diminished rental supply:
Federal Government
- significantly diluted depreciation deductions for property investors, thereby adding pressure to investment cash flows.
- APRA implemented excessive credit policy rules which reduce investor participation rates and Australia’s ability to supply sufficient rental accommodation.
State Government
- introduced layers of rental legislation and extra property ‘compliance’ costs.
- increased regulatory powers granted to tenancy authorities, increasingly intended to support tenants at the expense of landlords.
- dictating how owners must use their hard-earned asset by charging a ‘vacancy tax’.
- introduction of a ‘catch-all-states’ land tax (it’s outright theft).
Local Governments
- charging investors a loading on city council rates (just because they can).
- introduced tight property usage restrictions along with extra charges to those who choose to use their asset for short-stay accommodation (even though this is incredibly important for holiday-seekers and the broader visitor economy).
Banks
- charge investors a higher interest rate than owner-occupiers (just because they can).
Over the last 5 or 6 years, property managers all over Australia have been consistently commenting that numerous landlords had sold out of the market, largely due to government decisions, thereby removing much needed rental supply from the market.
The prolonged period of inadequate rental supply added to the rental pool resulted in fewer options for tenants and more competition.
This chain of events has already pushed 10,000’s of former tenants into makeshift shelter.
Welfare groups that provide makeshift shelter have never seen anything like it.
Caravan park managers have told Propertyology they receive up to 100 enquiries every day from desperate people that they can’t help.
Counsellors and mental health professionals are booked out for several months in advance.
The ‘lucky’ tenants who have (so far) managed to retain their rental accommodation have faced significant upward pressure on rental costs since mid-2017 onwards.
The aforementioned symptoms are now about to get much worse very quickly.
The facts that matter
As Australia’s population increased by 8.4 million over the last 30-years, state governments have secretly sold off more than 100,000 publicly-owned rental properties, presumably to fund competing interests such as infrastructure and political promises.
91 percent of Australia’s 3.2 million rental properties are funded by everyday Aussie investors.
This 230-year-old nation with 10.8 million dwellings produced a whopping 1.04 million first home buyers (former tenants) over the decade ending 2021. And previous records have been smashed in each of the last 3-years.
This is compelling proof that the rental crisis is *not* driven by rental demand but, insufficient rental supply.
Overseas migration over the last 2-years was only 8,555 (compared to 440,000 over the 2-years pre pandemic).
Of all of Australia’s rented properties, the primary occupant / tenant in 39 percent of them is aged 45 years or older.
Since 2016, the size of the national rental pool has failed to keep pace with rental demand.
Impact Economics recently completed a study on the impact that insufficient rental accommodation is already having on local economies all over Australia. They estimated a combined $2.59 billion revenue per year is currently forgone in just 5 major regions that they chose for their research (Sunshine Coast QLD, Launceston TAS, Surf Coast VIC, Illawarra NSW and Fleurieu Peninsula SA). The national cost must be staggering.
In a country with 25.7 million people, there were only 36,741 properties advertised for rent at the end of July 2022. That’s less than half the total available rental properties (75,707) at the same time 5-years earlier, when 1.2 million less people lived in Australia.
The national average price to rent a 3-bedroom house increased from $363 per week back in August 2009 to $433 per week in August 2019, and then $570 per week in August 2022 [source: SQM Research]. So, the same property that cost an extra $70 per week to rent after the 10-years to 2019, cost an extra $137 per week over the following 3-years. That’s the consequence of insufficient rental supply.
81 of Australia’s 100 largest townships have already seen asking rents increase by $100 or more over the last 5-years.
The highest increases in capital city house rents over the 5YE July 2022 were in Canberra ($170pw) and Hobart ($150pw) while the smallest increases were in Sydney ($70pw) and Melbourne ($50pw).
Some of the biggest rent increases were in Coffs Harbour NSW ($230pw), Geelong VIC ($180pw), Sunshine Coast QLD ($195pw), Launceston TAS ($150pw) and Busselton WA ($180pw).
That’s a rear-view-mirror look at the horror show produced by all 3-levels of government.
I absolutely guarantee that it is about to (quickly) get a lot worse.
Rental supply has tightened so much that 92 of Australia’s 100 largest townships now have a vacancy rate of between 0 and 1.5 percent.
The same clowns in high places who caused this rental crisis will, in time, be responsible for an investor-driven property boom. Let me show you why and when HERE.
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