July 8th 2024.
In Australia, there has been a concerning increase in the number of suburbs where households are struggling to afford rent. However, there is some hope on the horizon as there are indications that the pressure may be starting to ease in certain areas.
Recent data from real estate analysts Suburbtrends shows that the proportion of suburbs across the country experiencing extreme rental stress has risen from 72.25% in June to 72.90% this month. This increase can mostly be attributed to the states of Queensland and South Australia.
The report has highlighted the need for targeted interventions to address the issue of unaffordable housing. It notes that high rents not only have a negative impact on individual households, but also on the overall economy. Kent Lardner, the founder and managing director of Suburbtrends, stresses the severity of the situation, stating that many families are forced to allocate a significant portion of their income to rent, leaving little room for other essential expenses. He emphasizes the importance of policymakers focusing on reducing rental costs to sustainable levels.
Unfortunately, there have been few policies implemented by governments to address this issue in the short term. Instead, the focus has been on the national goal of building 1.2 million homes in the next five years to increase supply and gradually ease housing prices. Although, the federal government did increase Commonwealth Rent Assistance in this year's budget, and the Australian Capital Territory is the only jurisdiction that places limits on rent increases. Landlords there must obtain special permission to raise rent by more than 10% of rental inflation.
According to the report, the Australian Capital Territory is the only state or territory where rents have decreased in the past year, although only by a small 0.14%. While the overall rental market in Australia is still unaffordable, there are some glimmers of hope in this month's report. The number of suburbs in New South Wales, Victoria, Western Australia, and particularly Tasmania, experiencing extreme rental stress has decreased. Additionally, vacancy rates have surprisingly increased in suburbs such as Marrickville in Sydney's Inner West, as well as inner Melbourne and Sydney.
However, Lardner urges caution in interpreting these early signs of easing pressure, as the rental market is still heavily favoring landlords. He acknowledges that the slight improvements in states like Tasmania are promising, but emphasizes that high rents continue to be a burden for many households. It is not enough for rents to stabilize; they need to fall below 30% of household income to ensure long-term affordability.
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