In recent months, as the nation’s policymakers have shifted their attention to everything from the Phase III tax cuts to the debate over the role of nuclear power in the country’s future energy mix, the rent crisis has somewhat faded from the spotlight.
After Prime Minister Anthony Albanese pledged to cut immigration and “Fixing” the country’s “broken immigration system” Late last year, some might think that major steps had been taken to address the rental crisis.
According to the latest figures from research firm SQM, there has been almost no progress in resolving the rental crisis since this time last year.
Nationally, the number of vacant rental homes increased by just 770 compared to the same period last year. Overall, the country’s rental vacancy rate remains unchanged from June 2023, with just 1.3 percent of rental homes vacant.
“Based on history, we have now reached the peak of winter rental vacancy rates,” said Lewis Christopher, managing director and property expert at SQM, in a recent report on the future trajectory of rental vacancy. “It is likely that from July onwards, vacancy rates will start to contract again and continue to contract through November… So far this year, we appear to have recorded very similar vacancy rates compared to the same period in 2023.”
“Overall, the national rental market remains severely underserved, and with a few exceptions, the situation is not expected to improve significantly due to the rental crisis for several years,” Christopher said.
However, he noted that while the rental crisis will continue in terms of
With a severe shortage of available homes, there is a slight hope.
“However, a lot of the structural rent shortfall is now baked into the rental market price, so I think the days of 10 to 20 percent annual rent increases are over,” Christopher said.
Although there has been no progress, this does not mean that thousands of Australians are not
Their lifestyle has changed as a result of the rental crisis.
According to the figures provided on the housing sharing website Flatmates.com.auIn January, more than 210,000 people searched for shared homes or potential partners, marking the platform’s busiest month ever.
Claudia Conley, community manager of Flatmates.com.au, said half of all property listings on their portal were from homeowners, with the majority of them being live-in owners and renting out a guest room.
In the event of vacancy, this has the positive effect of reducing demand for rental accommodation, due to the tenant joining existing familyinstead of starting their own home with housemates.
Unfortunately, demand for housing is growing at a much faster rate than the construction sector can build new homes and enable Australians to change their living arrangements.
Expectations of the balance between supply and demand for housing in the future
To get an idea of what future housing demand will look like, population growth estimates will be based on net migration projections from the federal Treasury and the three-year average of natural population increase (births minus deaths).
For 2024 and 2025, this means 260,000 net immigrants and 119,200 people from population expansion through natural increase.
Here we should review the factors that affect the demand for housing step by step.
While there are other factors at play, our topic today will serve as a broad overview of the bulk of the factors at play.
Based on a population growth of 379,200 and an average household size of 2.5 people, the basic requirement to complete housing construction is 151,700.
But not every new home completed results in a net addition to the housing stock. Because of the impact of demolition and rebuilding, reconstruction after natural disasters, redevelopment of homes into other types of structures, and a number of other factors, each new home completed adds approximately 0.85 homes to the net housing stock.
Once the impact of that is taken into account, demand for housing starts rises to 178,400 units.
This brings us to the big problem, the changing demographics. As Australia’s population declines,
As the number of children increases and the population ages, the average household size is shrinking, putting upward pressure on housing demand. For example, due to the shrinking household size observed in the Australian Bureau of Statistics data for 2022-23, the number of homes wanted in terms of net value increased by more than 59,000 in a single year.
By taking the average increase in housing demand by demographics over the past five years and adding it to the mix, the number of homes needed swells to more than 230,000.
That’s a far cry from the current level of 171,700 completed units in the latest figures, which are expected to decline further before bottoming out later in the year. Houston Housing Authority chief economist Tim Redon estimates that 176,000 new housing units will be completed in 2024 and 2025, and that completions will reach 215,000 annually in 2026, 2027 and 2028.
Unfortunately, this illustrates how difficult it may be for the nation to emerge from its rental crisis. While continued growth in rents at a rate much higher than wage growth will push more Australians into sharing homes, it is an open question whether the nation’s continuing demographic shift will be able to counteract this.
So far, data from the Australian Bureau of Statistics’ measure of average household size suggests that the trend towards shared housing is being offset by an ageing population and a declining number of children per household. Ultimately, with the current supply and demand conditions in the housing market, there is no end in sight to the worst rental crisis in at least a generation.
Tarik Brooker is a freelance journalist and social commentator | @AvidCommentator
