Brisbane’s rental market is about to (quickly) change according to analysis conducted by leading property market research firm and buyer’s agency, Propertyology.
The current low volume of rental supply is incredibly unhealthy to the extent that Propertyology anticipates asking rents for standard Brisbane houses may increase by as much as $5,000 per annum by the end of the 2022 calendar year.
For much of the last 20-years, Brisbane’s rental supply held an equilibrium with rental demand. Consequently, the price of rents in Australia’s third biggest city largely flatlined.
But, at the end of June 2021, there were only 4,520 residential dwellings advertised for rent across Greater-Brisbane.
That is a massive reduction from 9,222 dwellings 5-years earlier, when 230,000 fewer people lived in Brisbane.
Why Rental Supply Is Restrained
For as far back as official records go, the ratio of total population living in rental accommodation has always hovered around 35 percent.
Unfortunately, the rate of extra rental supply coming onto the market reduced from 2015 through to 2020. So, the supply-demand equilibrium was snapped well before COVID-19 and Brisbane rents started to increase in 2019.
98 percent of rental accommodation in this country is funded by everyday Aussie property investors.
It has been (and always will be) that way, primarily because state and federal governments do not have sufficient revenue to fund rental housing (as it is, they can’t afford to fund all of the required new infrastructure).
Since 2015, the landscape for property investors included concern about unpredictable tax policy changes, new state government rental legislation diluting asset owner’s fundamental rights, very restrictive credit policies and an underwhelming market outlook.
Bearing in mind that investing is a discretionary action which involves a preparedness to assume risk, the aforementioned conditions produced a significant reduction in property investor participation rates.
Brisbane’s total population increase of approximately 30,000 people in the 2020 calendar year is well down on the 50,000 that it normally produces.
Nonetheless, total rental demand still increases each and every year, and the volume of extra rental supply required has consistently fallen short for too long.
As a result, Brisbane’s rental vacancy rates have consistently tightened in recent years.
COVID-19’s Influence on Rental Demand
Tens of thousands of international students have left Australian capital cities to return to their own country of origin.
Related article: How border closures affect property markets
Conversely, tens of thousands of expats have moved back to all corners of Australia.
Social distancing restrictions have created long-term disruptions for employment conditions in congested city centres. Consequently, reduced appeal for living inner-city has created a permanent structural change that represents the final nail in the coffin for apartment capital growth potential and rental returns.
In attempt to escape future lockdown risks, we’ve also seen increased rates of domestic relocations. In the 2020 calendar year, internal migration produced a net population decline of 26,000 in Melbourne and 32,000 in Sydney and it’s hard to see an end to this exodus.
And then there’s a gazillion people enjoying new-found lifestyle flexibilities and productivity improvements through working-from-home. In many cases this has triggered a desire to move home.
Related article: Australia’s Top 30 WFH hotspots
Contrary to commentary suggesting that ‘everyone is moving to Brisbane’, the official ABS data confirms that the 13,000 net gain from internal migration in 2020 is very similar to previous years.
Australia’s biggest internal migration winners are a long list of wonderful regional locations.
Cause and Effect
The alarmingly low participation rates by everyday Aussie property investors has led to Australia now being in the midst of the single biggest real estate crisis in our nation’s history.
To put things into perspective, the asking annual rent for a standard house was between $1,500 and $7,000 higher in June 2021 than 18-months earlier in 34 individual Australian cities and towns.
Mark my words, Brisbane will soon join this list!
There (quite literally) is only *one* solution for releasing the intense upward pressure on rents and that is to put the baseball bats away and to stop over-engineering the housing system with new layers of regulation. Eventually, investor participation rates will increase.
Investing in Brisbane Real Estate
Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day.
We use our thought-leading market research to help everyday Aussies to invest in strategically chosen locations (literally) all over Australia.
Here is a great example of investing in Brisbane’s property market.
Like to know more? Contact us here.