The rental crisis in Australia is a growing concern, impacting tenants and landlords alike. In fact, as of February 2023, the national vacancy rate is still on its lowest point in record at 0.8% — the lowerst since April 2006.
For property investors, the last decade has been fraught with poorly thought-out policies and reforms from the government and regulators. These have resulted in a reduction in the supply of properties for rent, even as the demand and rental price have skyrocketed.
Simply put, property investors have not been so keen on investing, which has helped worsened the rental crisis Australia situation. So in this blog, we will try to answer the question: why is there a rental crisis? We will also explore what rental crisis means for property investors, and how they can help. Join us as we delve into the factors contributing to the crisis, the need for a more balanced approach, and the role of government in finding solutions to keep private investors in the rental market.
Why is there a rental crisis in Australia?
There are a host of reasons for the ongoing Australian housing crisis:
1. Constraints in construction
According to the National Housing Finance and Investment Corporation (NHFIC) report, the construction industry has been under pressure due to the tight supply of labour and materials, bad weather, and delays in construction. The report states that about 28,000 dwellings were delayed in construction last year.
The availability of serviced land, higher construction costs, long lead times, and community opposition have also impeded construction. These constraints have reduced the supply of dwellings, alongside the higher interest rates in mortgages and construction loans.
2. Increased migration activity
The massive influx of migrants, both internal and foreign, is putting pressure on the rental market and contributing to the shortage of available Australian rental properties.
People have been returning to large cities close to employment centres after the Covid-19 pandemic. According to the data from the Australian Housing and Urban Research Institute, between 2016 and 2021, regional Australia gained 184,000 people who moved from having previously lived in a capital city. In Queensland along, there is a recorded increase of 63,700 in its regional population.
The Albanese Government announced a range of measures to accelerate Australia’s immigration intake, including increasing the permanent migrant intake by 35,000 to 195,000 and allowing international students to work unlimited hours while studying. These measures led to record levels of temporary visa arrivals in 2022, driven by international students seeking work and permanent residency, resulting in a record 360,000 visa applications lodged overseas by students last year.
We are also expecting around 40,000 to 50,000 Chinese students coming to Australia in the next few months. This is thanks to the Chinese Government’s decision to no longer recognise foreign academic degrees and diplomas if the study was conducted online.
There is a silver lining amid the rental crisis for property investors
84% of all Australia’s rental accommodation are owned by private property investors right now. This means that they have the most power in turning the rental crisis around. And this growing shortage of rental properties in regional cities offer opportunities for investors.
However, the series of unfavourable government policies have set property investors back. Since the rental crisis is mainly rooted to the lack of housing supply, the government needs to encourage private investors to get back into the market to provide the rental accommodation that the government and large corporations cannot. More investors would translate to more rental stock, which would ease demand levels in the rental market and help overcome an overheating of rental prices.
Buying in a correcting market may seem counterintuitive; however, history has shown that this is the best time to buy, with less competition and more time for due diligence. As migration ramps up, the rental crisis is likely to worsen, making it more crucial than ever for private investors to step in and provide much-needed rental accommodation.
With the consumer confidence at low levels and a lot of prospective owner-occupiers waiting the rental crisis out, now might not be such a bad time to invest. Interest rates are also nearing their peak, and when it does, the market will reset which could help in stabilising property prices towards an upward movement.
If you’re a property investor with a long-term focus, the current rental crisis might be a window of opportunity for you to make a profitable investment.
Invest in a rental property investment with SCF Solutions
At Sunshine Coast Financial Solutions, we support everyday Aussie investors like you! Build a profitable portfolio and secure your financial future with us. Feel free to reach out to our team when you’re ready to discuss your investment goals and start building your investment portfolio.
Meet Chris Wilson, the heart of Sunshine Coast Financial Solutions (SCFS). With over a decade of experience in finance, Chris started his journey as a broker with Aussie Home Loans in 2009. His dedication earned him the title of Rookie of the Year in 2010. By 2011, he was ready to build a business based on trust and strong partnerships.
