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A recent study has outlined the trends of more higher-income households being renters. What consequences will this have on the property market?
Recent data from PropTrack analysed the rental income trends that are having an impact on the property market.
According to the data, the income for renters has grown faster over the last 20 years than other household types.
Median income is up, with a typical renter household earning 58 per cent of what a mortgaged household earns. This is up from 52 per cent in 1995.
PropTrack’s executive manager, economics, Angus Moore said this trend doesn’t mean renters are seeing faster income growth, but that “higher-income households are now more likely to be renters”.
“Among higher-income households – say the top 40 per cent of households – the share who rent has been trending up over the past two decades. This has been happening everywhere; it is not unique to particular cities or regions,” Moore said.
There has been a steady decline in home ownership. According to data from the Australian Institute of Health and Welfare, in 1994–95, 41.8 per cent of households were home owners without a mortgage.
This dropped to 29.5 per cent in 2019–20. On the other hand, in 1994–95, 18.4 per cent were renting from a private landlord. This climbed to 26.2 per cent in 2019–20.
The same data revealed that as of 2019–20, 6.2 million households (67 per cent) were home owners, with or without a mortgage.
The remaining 2.9 million, (31 per cent) were renters while 192,000 (2.1 per cent) were other tenure, meaning not an owner with or without a mortgage, or a renter.
The increase in rentvesting may also be skewing results. As highlighted by Westpac, 54 per cent of first home buyers were considering this option, up 4 per cent from 2024.
But what are the consequences of higher income renters on the property market? According to Moore, it will place added pressure on lower-income households.
“This shift towards renters being a higher-income group has many implications. Higher-income households can afford to pay more in rent; absent sufficient availability, this will put pressure on lower-income renter households – a dynamic we are seeing at the moment,” Moore said.
“Higher-income renters will also have different housing preferences, which will mean the types of homes in the rental stock may need to change and evolve. Given housing affordability remains very challenging, and home ownership difficult for many households, this trend is unlikely to change anytime soon.”
This article was originally featured in Real Estate Business' sister brand Broker Daily.
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