Finance Property No end to rental pain: Why rents continue to rise despite falling property prices

No end to rental pain: Why rents continue to rise despite falling property prices

Hobart is in the grips of an affordable housing crisis, with rents rising 10.7 per cent over the past year. Photo: AAP
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There’s no relief in sight for struggling renters, as rents continue to rise around Australia despite falling property prices.

Over the past 12 months, rents increased in all capital cities except for Perth and Darwin, according to property data firm CoreLogic.

Capital city rents were 1.4 per cent higher year on year and combined regional rents rose 3.1 per cent. Residential property prices fell 0.8 per cent nationally over the same period.

The news comes a week after the release of an Australian Institute of Health and Welfare report showed the dream of home ownership is now out of reach to growing numbers of Australians, as the nation grapples with a chronic lack of affordable housing.

There are now more than 2.1 million Australians living in private rentals, with renters comprising more than a quarter of all households, Australian Bureau of Statistics figures show.

Rising rents are indicative of Australia’s troubled housing system, according to University of New South Wales City Futures research fellow Chris Martin.

“Rents more directly reflect real demand for housing – that is, as a place to live,” Dr Martin said.

“For years, property prices have been driven higher, and out of line with rents, by speculation – by purchasers gambling on some future purchaser coming along and paying more. When they are not so confident of that happening, prices may fall, even as rents rise.”

In April, an inquiry into the future of the private rental sector by the Australian Housing and Urban Research Institute found that the sector is the fastest-growing part of the Australian housing system.

The private rental sector in Australia increased by 38 per cent over 10 years (2006-2016), more than twice the rate of household growth, the report found.

Median rents across Australia as at June 2018. Source: CoreLogic

In 2013-14, 1.135 million Australian households were “investor landlords”, with 72 per cent owning one rental property.

In May, the latest rental affordability index (RAI) — an indicator of rental affordability relative to household incomes — showed that Hobart has leapfrogged Sydney to become the least affordable capital city in Australia.

Income growth failed to meet increasing levels of rent in Hobart, where house prices have also soared over the past year, the report found. Household incomes in Hobart are lower than the national average, yet rents are comparable to mainland averages.

According to the RAI, households in Hobart spent an average of 29 per cent of their income on rent. A rental property is considered unaffordable when 30 per cent of household income is spent on rent.

“The [rental] situation remains untenable for low-income households in metropolitan areas across Australia,” the report found.

Hobart was the “standout performer” across all the capitals over the past 12 months, according to CoreLogic, with the Tasmanian capital recording a 10.7 per cent rise in rental rates.

According to Dr Martin, Hobart’s skyrocketing rents reflect Australia’s “perverse” housing market.

“The description of Hobart, where rents have increased 10 per cent this year, as a ‘standout performer’, will be no comfort to Tasmanians in need of affordable housing. But it is revealing of the perverse way in which we regard our housing system,” he said.

“There is not much ‘performance’ required of individual landlords in collecting rents – it is not like they are putting in 10 per cent more effort, or delivering 10 per cent better housing.

“Ten per cent rent increases are a sign of a housing system that is not ‘performing’.”

Dr Martin criticised the state and federal governments, which last week published the bilateral agreement between the Commonwealth and Tasmania under the new National Housing and Homelessness Agreement, committing Tasmania to producing “just 15 new social housing dwellings per annum”.

Waitlists for social housing in Australia are long, with 189,400 households awaiting social housing allocation at June 30, 2017, according to the Australian Institute of Health and Welfare.

“Governments need to step in and increase supply of rental housing for low-income households,” Dr Martin said.

“There is a clear role for governments in supplying rental housing for low-income households and the present level of funding goes nowhere near delivering enough.”

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