Diving into Australia’s Housing Crisis: Seeking Solutions

Hello,  Andrew Bell here.

As you’ve likely noticed, I’m deeply entrenched in addressing the critical issues surrounding our current housing crisis. Housing is a universal concern in Australia; we all need a roof over our heads. And as widely reported, we’re facing the most severe housing shortage in our nation’s history.

I’ve previously highlighted the glaring contrast between supply and demand, particularly evident in the rental market. Allow me to share some compelling statistics with you.

Firstly, let’s consider the recent surge in rental costs, which follows a prolonged period of minimal growth. In the four years preceding the pandemic, national rents increased by an average of only $25 per week. In some instances, rents even declined by as much as $30 per week. While this acceleration in rents over the past four years may seem less dramatic when viewed over a 15-year period, it has undeniably been a shock to renters.

Now, let’s delve into the worsening rental crisis, which has two key components: the escalating cost of rent and the dwindling availability of rental properties. Take, for example, a recent experience from our property management company on the Gold Coast. Within four days of listing a property for lease, we received over 500 inquiries and 37 applications. The graph below illustrates the alarming decline in rental vacancy rates. Traditionally, a 3% vacancy rate signifies a balanced rental market. However, major capitals, with the exception of Melbourne, now report vacancy rates of 1.5% or less. Here on the Gold Coast, our vacancy rate hovers around a mere 0.7%.

Given such high demand, it’s no surprise that we’re all seeking ways to boost supply. Unfortunately, building approvals, which encompass both rental properties and general housing, have plummeted to near-nonexistent levels. This decline is starkly evident when comparing current levels to those of the ’80s and ’90s, despite our significantly larger population today.

The latest figures reveal a staggering 7.8% increase in rental prices over the past year, the most significant rise since the March 2009 quarter. However, there are indications that rental growth may be decelerating. Yet, sustaining this deceleration relies heavily on increasing the supply of rental properties, as our robust population growth consistently manifests first in rental demand.

Additionally, there’s some positive news regarding new housing loans to investors, showing a slight uptick. However, it’s crucial for existing landlords to retain their investment properties rather than selling them off.

In addressing this crisis, a straightforward solution presents itself: we need to construct more purpose-built rental accommodation, primarily in the affordable rental space ranging from $600 to $850. This approach would facilitate bulk building, rather than relying solely on individual investors buying properties one at a time. This model, known as build-for-rent, is prevalent in other parts of the world and promises a swift acceleration in supply.

It’s imperative for governments to refrain from vilifying investors and instead offer incentives to encourage investment. Nearly 90% of all rental properties in Australia are owned by individuals such as teachers, nurses, and public servants. They are not greedy landlords exploiting tenants but rather individuals striving to build a nest egg for their retirement, which should be applauded and encouraged.

Well, that’s all for this edition. I eagerly anticipate our next discussion in a fortnight, where we’ll delve deeper into the fascinating build-for-rent market.