Low income renters could be locked out of regional housing markets

author-avatar By on April 22, 2021
Low income renters could be locked out of regional housing markets

The regional property market has boomed during COVID, but an increase in demand for rental properties could see lower income renters pushed out.

New research by the Australian Housing and Urban Research Institute (AHURI) found that an increase in demand for rentals in regional property markets could see landlords increasingly shun lower income renters.

The research, 'Pathways to regional housing recovery from COVID-19' analyses the consequences of the pandemic for households in regional Australia, using Tasmania as a case study.

The report suggests an increase in demand for regional rental properties could be because of lower investor confidence in the wake of fewer incentives to invest in property, increased numbers of tenants who owe arrears, policy which has protected tenants, and lower housing demand from migrants.

"There is a risk that landlords may shape future risk mitigation strategies in ways that further exclude renting to lower income tenants because they perceive these groups to present a greater risk to rental revenue," said the lead author of AHURI's report, Dr Julia Verdouw from the University of Tasmania.

"This housing demand, most likely due to regional living being perceived as ‘safer’ than cities in a pandemic, is putting upward pressure on dwelling prices while lowering vacancy rates and reducing affordability in regional Australia.

"In fact, while values in cities decelerated as a result of the COVID-19 crisis, regional values have been growing at 5% per annum, surpassing the growth rate in cities."

Regional property markets have been booming over COVID, with house prices in the regions increasing in value more than capital cities.

The combined five capital cities' dwelling prices index decreased by 1.45% compared to 3.77% in 'rest of state' regions by the end of November 2020, according to CoreLogic.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

The report said regional areas generally have higher higher levels of socio-economic disadvantage, including lower incomes, higher unemployment rates, and more reliance on small business or industries with rates of casualised and part-time work.

According to AHURI, there is also a "critical shortage" of affordable rentals near jobs for lower income workers.

The report said the winding back of JobKeeper and JobSeeker, which buffered the effects of job and income losses, will expose lower income renters who rely on income support to further housing risk in regional areas.

Recent research found JobSeeker recipients are spending as much as 69% of their income on rent, putting them squarely under the threshold for extreme rental stress.

"In Tasmania, where employment is disproportionately reliant on industries significantly affected by COVID-19, such as the tourism and hospitality sector, increases in income support masked pre-existing levels of poverty in the community," Dr Verdouw said. 

The report calls on the federal government to maintain targeted income protection, build employment and income security, and expand access to affordable housing by investing in more social housing and rolling out financial support for households in housing stress. 

"For populations in regional areas to grow and thrive, Australian policy makers need a big picture, long-term perspective: untethered to political cycles, and demonstrating a deep political commitment to reducing regional and rural poverty and narrowing wealth inequality in Australia," the report said.

Read more: What's in store for struggling renters in 2021?


Photo by Finn on Unsplash

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 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.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

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.

*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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Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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