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A new report showed rental supply across the country has fallen to its lowest level in almost two decades, as the reopening of borders put added demand pressure on the already struggling market.
PropTrack’s Rental Report for September 2022 showed that the total number of rental properties listed on realestate.com.au declined 20.5 per cent in the past 12 months, taking supply to its lowest level since mid-2003.
The decline in total stock comes as data showed that the number of new listings declined 10.4 per cent on a monthly basis to be 7.1 lower compared to the same period last year.
With stocks so restricted, PropTrack noted that tenants are battling it out for every vacancy. Data showed that demand for rental listings has surged by 18.8 per cent over the last year.
The low number of available rental listings across the country has also caused low levels of rental vacancy, which was seen at a historic low of 1.6 per cent in September.
Proptrack noted that the downward trend in supply is also driving rental properties to be snapped up quicker than ever before. In September, the median number of days a property was listed for rent on realestate.com.au was 19 days.
PropTrack director of economic research Cameron Kusher, said the rental market continues to tighten as the Federal Government ramps up immigration.
“Australia’s rental market remains extremely tight, with vacancy rates and supply reducing further over the September 2022 quarter,” Mr Kusher said.
As the screws continue to tighten on supply as demand continues to kick into high gear, rental rates across the country have surged.
Data showed that rents grew by 4.3 per cent during the three-month period to September — the fastest quarterly gain on record.
The expert cited data showing new mortgage lending is trending lower, with investor lending observed to be charting the same downward course — resulting in fewer investment properties being purchased and exacerbating supply challenges.
In August 2022, new lending to investors was $8.9 billion, the lowest value since June 2021 and 23.9 percent below its recent peak.
The share of overall lending to investors remains below its long-term average, as it has consistently since mid-2017.
“With fewer investors purchasing homes to rent out, the limited supply of stock, coupled with strong demand, is leading to heightened increases in advertised rental prices,” he said.
Mr Kushner said that as people move back to the major capital cities as the uncertainty surrounding the pandemic recedes into the background, increased pressure on rentals will also continue.
“The growth and tightness in the rental market appears to be shifting from regional areas back to the capital cities. This is being driven by the return of many people who migrated regionally during the pandemic back to capital cities and the lift in overseas migration,” he commented.
According to Mr Kushner, the pressure from increased migration is particularly prevalent in Sydney and Melbourne.
“Most overseas migrants to Australia settle in these cities with few purchasing a property before arrival, which is likely to keep demand for rentals heightened as supply of rentals is expected to continue to recede, pushing prices higher,” the expert explained.
Across the combined capital cities, rents increased by 3.2 per cent over the quarter, while rents were unchanged in regional areas.
On the supply side, Sydney (-24.2 per cent), Melbourne (-32.8 per cent) and Brisbane (-22.7 per cent) saw the biggest year-on-year declines in total listings.
In terms of demand, Melbourne (45.8 per cent), Sydney (26.8 per cent) and Brisbane (25.9 per cent) also recorded the strongest increases in demand per listing year-on-year.
While there are ways to alleviate the issue, Mr Kushner professed that there doesn't appear to be a “quick fix” to the current situation.
“The solution to the current tight rental market is either more rental supply or less rental demand, or a combination of both,” he commented.
And despite supply flowing from build-to-rent developments, Mr Kusher predicts that any stock additions will be outstripped by the increase in demand stemming from the re-opening of international borders and the ongoing decline in purchasing by first home buyers.
“These demand and supply issues can be addressed but none of these factors appear set to change in the near-term, which means a further tightening of rental supply and increases in rental costs seems likely over the coming year,” he added.
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