Australian rental affordability has dropped to its worst levels in nearly a decade, with the average household spending a third of its income on rent, as the impacts of the Covid pandemic continue to be felt on the market. Lower income households pay even more, with more than half of their income going towards their rent, according to new research from ANZ and CoreLogic.
The ANZ CoreLogic housing affordability report has found rental affordability – the portion of income required to service a new lease – is at its highest level nationally since June 2014, with 30.8% of an average income required to service a new lease.
Perth saw the worst deterioration of housing affordability for lower income households between March 2020 and March 2023, while Hobart recorded the worst housing affordability figures, with nearly 60% of income needed to pay rent. Only Melbourne saw a slight reduction in the portion of income needed to pay rent for lower income households, due to the growth in income at the 25th percentile level.
Sydney is still the most unaffordable market for home ownership. The report found that, on average, Sydneysiders paid more than half their income towards their mortgage, and would take about 12 years to save up enough for a 20% deposit.
The report attributed much of the pressure on the housing and rental market to supply, an issued intertwined with the onset of the pandemic. Soaring construction costs and interest rates have also forced more people into the rental market. While the affordability figures were not surprising due to the rental crisis, they meant more people would be forced into difficult living situations.
The annual proportion of property approvals where the dwelling would be owned by a government authority has fallen from about 9% in the 1980s to just 1.6% over the past five years. After a brief spike in public sector housing approvals in 2009 and 2010 – a Rudd government social housing initiative in response to the global financial crisis – the decline of social housing has continued in the years since. Rents have soared as much as $600 a week over the past year in some suburbs. The pandemic has continued to affect demand and supply in the housing market.
Changing lifestyle choices, coupled with construction delays, labour shortages and increasing material costs, slowed down supply. The report said the pandemic had changed what people wanted from their homes, with residents looking for more space inside and out and heightened demand for “lifestyle locations” amid the boom in work from home arrangements.
Supply chains are extremely vulnerable and can quickly cause major delays and dramatically increase project costs. The new dwelling supply pipeline, particularly for higher density products, can be turned off very quickly by rising construction costs. It is far slower to turn back on.
