Australia’s rental supply is collapsing – MacroBusiness

As we know, rental property vacancy rates in Australia have fallen to an all-time low, amid record immigration growth due to population growth and falling housing construction.

New data from PropTrack shows that the supply of rental housing has collapsed across the country.

In March 2024, the number of new homes offered for rent was 13.7% lower than a year earlier and the new rental supply was the lowest since 2010 in the month of March:

Source: PropTrack

New rental supply in the combined capital cities and combined regional markets was each 13.7% lower in March 2024 than a year earlier.

Compared to the average from March to 2022, new rental properties in the capital were 23.2% lower and combined new rental properties in the regional market were 26.1% lower.

Source: PropTrack

The total number of rental properties also fell by 11.3% compared to March 2023, with the least total rental supply for the month of March since 2010:

Source: PropTrack

The combined capitals have seen a 10.7% fall in total rental supply over the year to March 2024, which is 34.2% lower than the March average over the ten-year period to 2022.

Regional markets have seen a larger annual decline in total rental supply of 12.7% and compared to the March decade, the average total supply is 38.5% lower.

Source: PropTrack

Properties listed for rent on realestate.com.au also rent quickly.

The average number of days on site in March 2024 was 18 days. This was unchanged from March 2023, but was lower than the March average of 23 days over the five years to 2022:

Source: PropTrack

Not surprisingly, PropTrack also recorded a drop in vacancy rates to record lows in the combined capitals:

Source: PropTrack

The national rental vacancy rate was recorded at 1.1% in March 2024, down from 1.2% in the previous quarter and down from 1.3% in March 2023.

Houses still showed a much lower rental vacancy rate (0.9%) than units (1.6%) in March 2024. Home vacancy rates fell over the quarter and year, down from 1% in December and March 2023. Vacancy rates also fell from 1.9% in December 2023 and from 1.8% in March 2023.

Source: PropTrack

PropTrack notes that before the pandemic, the national rental vacancy rate was typically around 2.5%. This indicates how many conditions have been tightened.

“Due to the limited new rental supply and the continued strong demand for rental properties, vacancy rates are expected to remain low. This re-emphasizes how a significant increase in rental stock or a reduction in rental demand is needed to achieve more stable rental conditions comparable to those before the pandemic.”

Meanwhile, asking rents have soared since the pandemic:

Source: PropTrack

Looking ahead, PropTrack sees no end in sight to Australia’s rental crisis:

“Australia’s population is growing at a rapid pace, creating greater competition for rental properties and exacerbating shortages.”

“During the twelve months to September 2023, the national population increased by a record 659,795 people. Of this increase, 548,770 came from net overseas migration, most of which are unlikely to own their own home and therefore rely on rental properties.”

“The continued growth in advertised rental prices is indicative of excess demand for rental properties and insufficient supply, alleviating the desperate need for more rental properties and housing in general.”

“Under the federal government’s housing agreement, the target is to build 1.2 million new, well-located homes over the five financial years to June 2029.”

“With housing approvals and construction at a decade low, interest rates at a decade high and construction insolvencies on the rise, along with material and labor costs , this goal seems increasingly unattainable.”

“Any significant imminent relief from rental market challenges appears unlikely as demand is expected to remain high and supply low, leading to higher rental prices.”

In short, as long as the federal government manages immigration at levels beyond the country’s ability to build new homes and infrastructure, Australia’s rental crisis will continue to worsen.

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