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June 25, 2021 by ash

Rental affordability worsens as housing supply dwindles

More than half of the country’s detached housing markets have become unaffordable for tenants as dwindling rental
supply fuels large rental price increases in many areas. Of the 2809 house markets assessed by Suburbtrends, 51 per cent require families to spend more than 30 per cent of their household income on rent. Renters in Byron Bay
now need about 75 per cent of their income to pay their rent. In 164 suburbs, households need more than half of
their income to pay the rent on an average three-bedroom house.
Rental prices for three- and four-bedroom houses have risen to as high as 79 per cent of median household
incomes in suburbs such as Main Arm and Byron Bay in the Richmond-Tweed region of NSW and Oaks Estate in
the ACT. Closer to the capitals, families in Mosman on Sydney’s lower north shore are spending nearly two-thirds
of their income on rent. In Melbourne’s inner suburb Toorak, families need more than half of their income to pay rent.
Units and apartments are also becoming unaffordable in a growing number of areas. In more than 21 per cent of the
unit markets, households need more than a third of their income to rent a two-bedroom unit. Tambaroora, in NSW’s
Central West, Villawood in Sydney’s west and Port Adelaide were among the most unaffordable unit markets in the
country where families are using up to 81 per cent of their income on rent.
“The rental shortage has hit regions the hardest. However, greater Darwin, the ACT, greater Hobart and to a lesser
extent greater Adelaide are all feeling extreme pressure with very low vacancy rates and rising rents,” said Suburbtrends
director Kent Lardner. Vacancy rates are currently sitting at 0.6 per cent in Darwin and 0.8 per cent in regional
Tasmania, Queensland, Victoria and NSW. They shrank to 1 per cent in greater Hobart, Adelaide and the ACT.
Louis Christopher, SQM Research managing director, said rental supply was a big challenge for the regions which
were experiencing large population inflow from interstate or from the cities. “It doesn’t take long for a region to reach
full capacity if the population shifts in that area,” he said. “The challenge going forward is that developers won’t
be able to respond by building more homes due to restrictive lending requirements by the banks, so supply will
continue to shrink.”
In some metro areas, the supply of rentals was less of an issue, but the rising rents were driving many households

further out of the city, said Martin North, director of Digital Finance Analytics. “There are a significant number of high-rise builds underway, so rental supply is not the main problem, but rental supply at the right price is,” he said.

“We’re seeing big spikes in rental costs as investors try to recoup losses from the COVID freeze. “Many renters are younger families with more limited incomes and cannot afford to pay more and some of them are moving
further away into cheaper areas, which is putting more pressure there.”
The current undersupply of rental houses will likely worsen when the international border reopens, Mr Lardner said. “Most new arrivals will flood into the vacant units within the cities, but some will go and rent in the suburbs and
regions, which are already experiencing rental shortage,” he said.