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Adelaide’s rental squeeze: A double-edged sword for housing market

By Emma Slape
23 April 2024 | 9 minute read
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Adelaide’s once-comfortable rental market has morphed into a tenant’s nightmare, with vacancy rates hovering stubbornly below 1 per cent.

While this might sound like a good thing for investors, the reality is this tightness is impacting the market on both the buying and selling ends.

The new data from PropTrack paints a clear picture: there simply aren’t enough rental properties available and stock on the sales market is also low. This scarcity creates fierce competition among renters and makes the process of renting extremely stressful.

A lack of available stock discourages potential investors from entering the market. With limited options and higher purchase prices, the return on investment becomes less attractive. This translates to fewer rental properties being built or entering the market, further exacerbating the shortage.

While a healthy rental market benefits both tenants and landlords, the current situation in Adelaide is far from balanced. Finding a solution requires a multipronged approach, potentially including government incentives for new rental property development, policies to encourage investors into the market, and considering different types of housing, including small properties with more communal space, close to major infrastructure.

Investors are telling us that they are keen to buy property in Adelaide and once interest rates start to ease, we do expect more of an injection of investors to the market, however, there are small incentives that could be given to first-time investors to accelerate this process, particularly for properties which would be offered to the rental market for under $500 per week.

Previous programs such as the National Rental Affordability Scheme have shown that tax incentives do attract investors, so it’s about getting that balance right and ensuring that the properties brought to market remain there for some time to give tenants stability.

As a community, we also need to review more closely what people are seeking in housing. For many now, a smaller property with shared facilities would suit them well and allow more housing on a small footprint, so we also need to make sure that type of housing is in the mix for future developments.

Likewise, we are seeing people want to share a large property, perhaps with two families, so are we ensuring that this type of stock is also in the market for the future?

Both state and federal governments are investing significant resources into housing, which is critical, and we need to make sure that new properties are spread across the state, including in regional areas, and there is a good mix of all different property types to suit a changing population.

Every additional property built provides a home and shelter, and although the quantum of what we need seems large, we shouldn’t forget the impact that each new property has on those who live within it.

Emma Slape is the CEO of Turner Real Estate.

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