Rental affordability the best in 13 years (as long as you aren't on JobSeeker)

author-avatar By on September 02, 2020
Rental affordability the best in 13 years (as long as you aren't on JobSeeker)

Photo by Josh Spires on Unsplash

A new report shows rental affordability across Australia improved in the June quarter to reach its highest level since 2007 - but Australia's poorest citizens might disagree.

The Real Estate Institute of Australia (REIA) Housing Affordability Report released yesterday shows both rental and housing affordability improved over the past year and particularly in the June quarter. 

According to the report and REIA president Adrian Kelly, the proportion of income required to meet rent payments decreased by 0.4 percentage points to 23.3% over the quarter, and is down by 0.5 percentage points compared to this time last year. 

For reference, the threshold for rental stress is generally considered to be 30% of one's income. 

“This can be mainly attributed to the reduction or stabilisation of rents during the June quarter with only the Australian Capital Territory having an increase in rents," Mr Kelly said. 

Looking to compare low-rate, variable home loans? Below are a handful of low-rate loans in the market.

Indeed, the Domain Rental Report for the June quarter (April, May and June) showed a 3.2% fall in the national unit rental price worth $15 per week - the biggest decline in over 15 years. 

It also found that house rent prices fared a bit better than units in the June quarter but still fell by 1.2% nationally to $446 per week. 

Median house rent prices

Source: Domain

The news that rental affordability is at its highest since 2007 will be news to some, particularly those on JobSeeker, JobKeeper or the pension.

Another newly released rental affordability report by Anglicare on Monday found that even on the current increased rate of JobSeeker as well as JobKeeper, just 1% of rental properties across Australia on average are deemed affordable.

Cutting the JobSeeker rate by $150 in September would make just 0.2% of rental properties (168) affordable, and cutting back to the old rate in December would make just 13 properties (0%) affordable. 

“For people on the lowest incomes, rentals are even less affordable than they were back in March,” Anglicare Australia Executive Director Kasy Chambers said.

“Most of the price drops are at the higher end of the market. At the same time, more and more people are competing for cheap housing.

"That’s squeezing people out of the market. With 1.6 million people locked out of work, the new rate of JobSeeker is the only thing keeping them afloat."

So while rental affordability might be better overall, those at the lower end may be competing for a smaller share of affordable rental properties in today's rental market. 

Which states have the best rental affordability? 

According to REIA's report, Western Australia has the best rental affordability, with the proportion of family income required to meet the median rent decreasing to 16.1%, a decrease of 0.5 percentage points over the quarter.

The second-most affordable belongs to The Australian Capital Territory, boasting a rent-income ratio of 19.2%, although this has actually increased by 0.2 percentage points over the quarter. 

The state with the worst rental affordability is not New South Wales as you might expect, but Tasmania. 

Rental affordability in Tasmania improved over the quarter, with the proportion of income required to meet median rents decreasing by 2 percentage points to 28.5%.

New South Wales did have the second-worst rental affordability rating, requiring 27.5% of income going towards rent for the median household (a 0.5% decrease over the quarter). 

Each state's rental affordability can be seen in the table below. 

State

Income-rent ratio 

Median house rent - June quarter

Median unit rent - June quarter 

WA

16.1%

$370

$320

ACT

19.2%

$575

$470 

NT

20.2%

$480

$380

QLD

21.5%

$400

$380

SA

21.5%

$395

$320

VIC

22.5%

$430 

$415

NSW

27.5%

$530

$500

TAS

28.5%

$450 

$380

AUS AVERAGE

22.12%

$453.75

$395.62

Sources: Income-rent ratio from REIA, rent cost data via Domain. House and unit rent data for each state’s respective capital city.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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