Experts are predicting a fresh rental crisis - but are we already there?

Australia’s renters could face an unprecedented squeeze in coming months, some experts have warned, as investors respond to falling house prices.

Consecutive interest rate rises and the government’s tax reforms have spooked investment buyers, observers say, though house prices remain at historically high levels.

And more falls in value are predicted in months to come, with some banks looking at prices declining to the end of 2027.

Australian Property Scout founder Sam Gordon said fresh rental data was the first sign that a rental boom was beginning to emerge, with annual rents increasing about 18 per cent in Darwin, 10 per cent in Perth and around 7 per cent in Sydney and Brisbane over the past 12 months.

National vacancy rates are at about 1.2 per cent, less than half of the 3 per cent Gordon said was generally considered a balanced market.

“We’re not heading towards a rental crisis, we’re already in one,” Gordon said.

Read more

Majority of Australians say falling house prices are a good thing

“The latest rental figures are consistent with what we expected. Australia already had a critical shortage of rental housing before these policy changes, and they are likely to place even greater pressure on rental supply over time.”

He said the government’s budget changes to negative gearing, the capital gains tax, and self-managed super funds lending, would continue to reduce investment in established rental housing.

“Australia’s rental market relies heavily on private investors. In fact, 30 per cent of Australian homes are privately held rentals,” Gordon said.

“When policy discourages investment in established residential property, it reduces the incentive for investors to supply rental accommodation. At the same time, housing demand continues to grow and new housing takes years to plan, approve and build.”

He said supply was a bigger issue than price at this point.

“Unless housing supply increases materially, the greatest risk over the coming years won’t necessarily be property prices,” he said.

“It will be the rising cost of accessing rental accommodation in an increasingly supply constrained market.”

Cotality Australia head of research Gerard Burg pointed to the same factors.

“We are seeing a profound shift in affordability across the market. In March this year, the typical household was allocating roughly one-third of their gross income to rent, compared to around 27 per cent just five years ago,” Burg said.

“While quarterly rental growth has eased slightly, the underlying supply deficit means conditions remain incredibly challenging for tenants.

Read more

Nicole Kidman, Laura Tingle, Anthony Albanese and more pay tribute to beloved NZ actor Sam Neill

“We are approaching a threshold where rental affordability acts as an increasing constraint on further growth, particularly in regional areas where lower median incomes mean households are spending upwards of 35 per cent of their income on rent.”

However, money expert Joel Gibson said it was likely to be months before the government’s tax changes could be fairly assessed.

The government said its tax changes should only increase rents by 2 per cent, though landlords have wide discretion in how they apply rent rises.

Gibson said renters had already been copping the ugly end of the stick.

“It’s going to take time to really see the data flow through,” he told Today.

“But if you look at the rental data that came out last week, for example ... really, really scary stuff, 5.9 per cent increase over the past year.”

He said median rents now sat at about $700, up $200 in the past five years.

That 40.6 per cent five-year increase compared to just 12 per cent rental cost growth in the five years prior.

“So it really has kicked up in the past five years. So renters are not imagining it,” he said.

“They really are copping it hard at the moment.”

He urged tenants who felt they had been hit with an unfair rent increase to make use of a rent-check website to see what the average for their area was.

“If you don’t think it’s fair and say, look, this is the median for the area, negotiate, you know, treat it like a job application,” he said.

“And be prepared to negotiate because you might have to.”