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Australia’s Rental Crisis: An Urgent Need for Action

@EQUITYMATES|31 January, 2023

Why is there a rental crisis?

The rental crisis in Australia has been a hot topic in recent months, as the country has seen a rise in rental values and a significant decrease in rental vacancy rates. According to data published by Corelogic, the national vacancy rate has fallen from 2.1% to 1.2% in the past twelve months, marking the largest rental upswing on record. The median weekly rent valuation across Australian dwellings rose from $430 per week to $519, which equates to a 22.2% increase.

One of the reasons for the rental crisis in Australia is the decrease in average household size. Prior to the COVID-19 pandemic, the average household size was 2.6 people, but during the pandemic people wanted more space, and the average household size has since fallen to 2.5 people. That might not sound like much, but it has created an extra demand for 200,000 homes, which is a significant number considering the average number of detached houses and units produced in a year.

Another factor is the mismatch between the supply and demand of housing in the country. The supply of housing is largely determined at the state level, while the demand factors such as interest rates and net overseas immigration are set at the federal level. There are also accusations that private developers hold back on land supply to keep prices inflated, but there isn’t a lot of evidence to prove this.

Do interest rates impact rent?

Interest rates don’t have much of an impact on rental prices, as they are set by supply and demand, rather than connected to rates. However, increases in rents can lead to increases in house prices as the return on an asset increases, making it more valuable to investors.

When will the rental crisis be over?

There is no one solution to the rental crisis in Australia, as it requires a crisis-level coordination between the state and federal governments. The solution would require a combination of increasing the supply of housing, controlling the demand for rental properties, and finding a balance between the two.

It’s unclear when the rental crisis in Australia will end, as it is dependent on a range of factors including economic conditions, immigration policies, and housing supply. Until then, it is important for the government to address the crisis and provide support for those who are struggling to make ends meet. This may include offering financial assistance for renters, increasing the supply of affordable housing, and implementing measures to control rent increases.

The rental crisis in Australia is a complex issue that requires a coordinated response from both the state and federal governments. While it may be difficult to predict when the crisis will end, it is important for policymakers to take action to address the issue and provide support to those affected.


If you want to discover more about the rental crisis and how it can be solved, then check out our recent episode of the Dive!

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