Australia’s Housing Affordability Crisis Deepens as Rental Market Squeezes Tighter
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Australia is facing an unprecedented housing affordability crisis, with rental properties becoming increasingly out of reach for many Australians. The latest PropTrack Rental Affordability report reveals a grim picture: households earning the median income of $110,000 a year can now afford only 39% of available rental properties, marking the lowest figure since the report began 17 years ago. “Over the six months to December 2023, households across the income distribution system could afford to rent the smallest share of advertised rentals since at least 2008,” noted Angus Moore, PropTrack’s senior economist. Moore highlighted a staggering 38% surge in rental prices since the pandemic as a primary driver of the deteriorating affordability
The situation is particularly dire in New South Wales, Tasmania, and Queensland, where affordability levels are the worst of any jurisdiction. In Sydney, for example, the median rent has reached $700 a week as of December 2023, significantly higher than the capital city median
Concurrently, the Australian property market has experienced volatility, with rapid price increases during 2020 and 2021, followed by a decline in 2022 as the Reserve Bank of Australia (RBA) raised interest rates. However, signs of recovery have emerged in 2023, with slight rises in property values across all capital cities in March and April, the first such increases in 11 months
Experts believe this recovery is due to a combination of factors, including net migration and a shortage of stock, leading to a more competitive market for sellers. Tim Lawless, director of research at CoreLogic, suggests, “Many prospective vendors have stayed on the sidelines through the downturn, keeping inventory at below average levels and providing sellers with some leverage at the negotiation table”
Despite the challenging conditions, experts do not anticipate a crash in the property market. Instead, they point to strong economic fundamentals and shifts in preferences during the pandemic as underlying supports. The market downturn observed in the latter half of 2022, while significant, is unlikely to result in a crash due to high rents and the return of overseas migration bolstering demand, alongside continued low unemployment limiting distressed sales
Looking forward, the conversation around housing affordability and market stability continues to evolve. As Moore from PropTrack suggests, addressing the surging rents requires a long-term strategy focused on increasing the availability and supply of rental properties. With the property market showing signs of stabilization and recovery, the broader economic implications of housing affordability remain a critical issue for Australians navigating the complex landscape of buying or renting a home.
References:
https://www.forbes.com/advisor/au/property/will-the-australian-property-market-crash/
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