Australia's red-hot rental housing market, supercharged by record migration and a chronic supply shortage, could be reaching a breaking point for affordability as tenants grapple with rising costs of living. Nationwide vacancies are at all-time lows and prices are up 30% over three years, forcing renters like Sydney office worker Lara Weeks into unenviable situations.
Rent is now one of the country's biggest drivers of inflation, which at an annual rate of 5.4% in the September quarter is well above the central banks' targeted band of 2% to 3% and could lead to further interest rate hikes as early as next week.
That in turn would push up the variable rate mortgages held by most Australian landlords who are typically private investors with one or a few properties rather than large corporations, pressuring them to lift rents further and forcing tenants to make tough decisions.
Many tenants, particularly in the most expensive city Sydney, have already been priced out of houses. PropTrack data showing house rents nationally were unchanged at A$550 per week, or about A$2,380 ($1,508) per month, in the September quarter.
Apartment rents nationally jumped 4% during the quarter, double the June quarter rate of increase, to an average of A$520 per week, making them almost as costly.
Prices across Australia's entire rental stock rose 7.6% in the third quarter from a year ago, the largest increase since 2009, according to official data, and similar to gains seen in the U.S. where rental costs have also surged.
Domain, a property website, estimates up to 70,000 new rentals are needed to balance out the market. Nationwide, the portion of income required to service new rentals rose to a record 31.4% in the June quarter, according to an ANZ CoreLogic Housing Affordability Report released in September. For low-income households, it was 52% as of April, its most recent published data, at a time when wage rises are lagging well behind rent increases.
