What exactly is happening with housing investment and private rentals in Australia? There is undoubtedly a scarcity of available properties, but new research shows a wide range of factors behind the pressure.
Launched this week by the Real Estate Industry of Australia (REIA) and REA Group, a report entitled ‘State of the Market: Australian Private Rentals’, looks at the role of rental properties as a critical component to our housing spectrum.
According to REIA president Hayden Groves, the report addresses the key issues facing renters and investors in a market that has reached crisis levels.
“Renters in Australia now make up 30% of households and housing stock”, Groves said.
“They face a competitive market, applying on average for six rentals before securing a new rental home. 75% of a successful applicants feel they have had to compromise on features in their rental.
“Vacancy rates nationally sit just below 1.5%, with advertised rents rising 6% for houses and 9% for units over the past year.”
Groves believes the tight conditions are driven by a change in household formation, an undersupply of quality rental stock, severe constraints on Australia’s home building industry and the resumption of immigration resuming.
“There are many factors driving this ‘perfect storm’ but often the key relationships within a rental transaction are completely overlooked in the broader debate: that of renters, property investors and property managers”, he said, adding that with Adam Bandt’s continued push for a national rent freeze, it was more important than ever that decision makers understand who supplies the majority of Australia’s private rental market.
“Investors are generally aged 35-65 years, with more 35-44 year-olds owning investment properties than 65-74 year-olds.
“70% of property investors only own one single investment property; and just under 20% own two investment properties.
“Less than 10% of all property investors own three or more properties.”
Groves said property investment as an investment class had grown since 1980 when the cohort made up around 4% of tax filers, whereas today’s investors make up 15% of tax filers.
REA Group Chief Customer Officer Kul Singh observed that there is a raft of ongoing challenges currently facing renters across the country.
“We need supply to meet the growing demand which is being further exacerbated by surging migration”, Singh said, adding that the fastest way to increase supply would be to mobilise ‘mum and dad’ investors who have demonstrated their willingness to provide rental stock to the one in three Australians that rent.
“Finding ways to incentivise them to participate instead of penalising them would go a long way in building confidence and creating stability in the property investment market”, he suggested.
“We also need to address the current challenges in attracting and retaining property managers that are critical to managing the growing rental sector.
“Challenges present opportunities to think differently and create meaningful change”, Singh concluded.
