The latest ANZ CoreLogic Housing Affordability Report said the combination of an undersupply of rental accommodations and a surge in renters is severely impacting affordability in Australia.
Rental affordability has reached its lowest level since June 2014, with the average household needing 30.8% of their income to service a new lease.
At the lower end of the income spectrum, this figure jumps to 51.6%, highlighting the immense pressure faced by households in the 25th percentile.
ANZ Senior Economist Felicity Emmett (pictured) emphasized the significance of rental metrics when assessing housing affordability, noting the increased demand for rental accommodation and the decline in social housing availability across all income brackets.
The report reveals that rental vacancy rates across the country were at 1.1% in April 2023, well below the decade average of 3%, while total rent listings were down by 38.1% compared to the previous decade’s average.
The pandemic-induced rise in regional migration has further exacerbated the situation, resulting in increased rent values and low vacancy rates in both regional Australia and major cities.
Rent values in regional markets have soared by 28.8% since March 2020, outpacing the 24.4% increase in capital cities.
Eliza Owen, CoreLogic Australia’s head of research, explained that the surge in rental demand is due to the combination of a higher number of dwellings required per household, driven by a return in overseas migration, and limited construction activity.
As rents rise sharply, investor conditions have become less favorable, leading to a slowdown in the completion of new rental properties.
While rental affordability is most strained in Hobart, regional Queensland, and regional New South Wales, Sydney stands out as the most unaffordable market for homeownership.
Sydneysiders, on average, need to allocate 51.6% of their income to service a new mortgage and require around 12 years to accumulate a 20% deposit.
These challenges, combined with higher building and construction costs, are contributing to increased rental demand and pushing more people out of the housing market.
Although there are signs of an increase in investment borrowing, a substantial supply response to alleviate pressures in the rental market is expected to take time.
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