Skyrocketing rents and ultra-low vacancy rates will remain at crisis levels for years, the Reserve Bank predicts in a rental report outlining the scale of the problem confronting the federal government as it attempts to roll out its own affordable housing scheme.
Reserve Bank research found several issues including sluggish home construction and investment and continued high demand for properties will continue to force up rents and lock up availability.
Housing Minister Julie Collins said it was clear that too many people across the country were finding it hard to get an affordable home.
“The answer to rental stress is all levels of government working together to have a sustained boost to the supply of homes to rent and a substantial investment in new social and affordable houses,” she said.
Collins said the national housing accord, which will bring together state and federal government departments with construction firms and institutional investors, was part of that work. One of the accord’s main aims is to build 1 million new “well-located” homes over five years from 2024.
Vacancy rates are below 1 per cent in all major capital cities, and rents rose by 4 per cent over 2022, according to the Australian Bureau of Statistics, the highest rate in a decade.
Growth in supply of new rentals is expected to be muted for years, according to the Reserve Bank, even as higher rental yields and the return of international migrants provides an incentive for more homes to be built.
Property developers have told the Reserve Bank that higher interest rates and building costs, coupled with lower house prices and apartment presales were dampening the growth in new home supply.
The Reserve Bank board has lifted official interest rates 10 times since they were 0.1 per cent in May 2022, increasing the cash rate to 3.6 per cent at its last meeting earlier this month.
“The decline in the demand for new dwellings is expected to weigh on overall dwelling investment over the next few years. As a result, vacancy rates are likely to remain at low levels,” the report said.
Labor MP Jerome Laxale said 40 per cent of residents in his electorate of Bennelong, which covers parts of northern Sydney including Ryde, are renters. It’s the highest concentration of tenanted properties in the country – and those renters have been struggling with large increases to their rent.
“What we’re seeing with that is just chaos at open houses, lack of availability, and situations where landlords are putting up rents by 10, 15, 20 per cent, in response to what’s been a pretty aggressive fiscal policy by the Reserve Bank,” he said.
Laxale said renters and low- to middle-income earners were disproportionately affected by rate rises.
“I’m getting evidence that landlords are using the rate rises and the increased cost to justify rent increases over and above the average interest rates, and that’s just making a bad situation worse,” he said.
“This is a national crisis that needs a national response.”
Max Chandler-Mather, Greens housing spokesman
Separate research released this week found Australia’s rental market was failing both landlords and tenants.
The report from property services companies LongView and PEXA showed landlords would be better off putting money into superannuation, while tenants face some of the worst conditions in the developed world.
Greens housing and homelessness spokesman Max Chandler-Mather said the government should be ashamed of the state of the rental market.
“This is a national crisis that needs a national response, and it’s no longer good enough for the PM to fob his responsibility for protecting renters off to the states,” he said.
Chandler-Mather said the country needs national tenancy standards and rent freezes to help protect renters who were forced to deal with mould, electrical and plumbing problems, poor insulation and a lack of longer-term security.
“With renters in Australia facing out-of-control rent increases and some of the worst conditions in the developed world, it would be a moral and humanitarian failure for the PM not to push for national tenancy standards and a freeze on rent increases,” he said.
Any changes to tenancy standards or rent freezing would have to occur through an agreement like the national housing accord, as the federal government does not have the power to make those decisions unilaterally. The federal government last brought in a rent freeze in 1945.
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