Australia is experiencing the tightest housing supply conditions in more than a decade, according to new analysis.
Research from national buyer’s agency Propertyology reports that large parts of the country will soon face intense pressure on rents as the nation opens up and household incomes improve.
The firm's assessment of property market conditions found only four out of 52 major Australian cities had a residential vacancy rate of 3% or higher at the end of June.
A market with a balanced supply typically has a vacancy rate of 2-3%, while higher than 3% can tip the scales in the tenant's favour, which can cause a reduction in median rent prices.
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Generally, a vacancy rate below 2% resembles a tight rental market where median rents would generally rise.
Five out of eight capital cities currently have vacancy rates below 2%.
Propertyology Head of Research, Simon Pressley, said Australia was teetering on a rental crisis, with sharp rent price rises inevitable.
“Right now, 39 out of 52 Australian towns (75% of the country) currently have an undersupply, nine locations have a balanced market, and the remaining four are oversupplied,” Mr Pressley said.
Mr Pressley said rental supply was a bi-product of the activity of mum and dad property investors.
“Large parts of Australia have seen several consecutive years of low volumes of properties purchased by investors," he said.
"As local demand continues to rise, the pressure continues to push rents (and yields) higher.”
“Literally this week, the principle of a property management business told our buyer’s agents that they only have nine vacancies among a rent-roll of 1700. This situation is not unusual for most of Australia.”
According to Propertyology, rental markets from Wollongong to Coffs Harbour to Orange, and several other locations in New South Wales are facing pressure.
"Everything in Queensland from Toowoomba to Townsville has intense pressure right now," Propertyology reported.
"Almost every Victorian location outside of Melbourne, the entire state of Tasmania, and the rental market of every location in Western Australia is currently under pressure."
Mr Pressley said he’s never seen any situation in the last 25-years where so many Australian locations have vacancy rates so low, rental yields north of 5% and interest rates below 3.5%.
Meanwhile, Melbourne and Sydney appear to be in stark contrast to the rest of the country, both in a technical over-supply, with vacancy rates at 3% and 3.8% respectively.
Data from ANZ and Corelogic released last week showed rental values had fallen over 7% in some inner suburbs of the two state capitals since the start of the pandemic.
Advertised rental properties increased by 57% in inner Melbourne in the same period, while Sydney's city and inner-south both recorded a 53% jump.
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 2020. 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.
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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.
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*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may inﬂuence the cost of the loan.
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