Hotspotting

It’s been 15 months since Prime Minister Anthony Albanese made his big announcement about fixing the housing shortage – but there has been, as yet, no progress in lifting rental vacancies and suppressing rental growth.

The press conference making the announcement that the Federal Government would build 1.2 million new homes in five years was held in August 2023 – but more than a year later it’s clear that little progress has been made and that rental vacancies are not improving.

The latest figures on vacancy rates from SQM Research shows the national vacancy rate at 1.2% In October, unchanged from September and only a fraction higher than a year ago.

Five of the eight state and territory capital cities actually recorded a month-on-month reduction in their vacancy rates, while two others recorded no change.

The only capital city to have an increase in vacancies was Darwin.

Overall, the number of properties available for rental has dropped from almost 38,000 in September to 36,500 in October.

To put that in context, in December 2016 – the last time Australia had a vacancy rate close to 3% - there were 90,000 homes available for rent across the nation.

And Australia has added about three million people to its population since 2016.

Compared with a year ago, when the Federal Government was spruiking its big fix to the shortage of homes, five of the eight capital cities still have vacancy rates at similar or the same levels – and one, Hobart, is significantly lower than 12 months ago.

The highest vacancy rate among the eight capital cities is Canberra at 1.7% - the same as it was a year ago and significantly lower than the benchmark 3% which is considered in the industry to represent a balanced rental market with stable rents.

Now, a year is a long enough time for a government to move the dial on an issue like the rental shortage. Australia could improve this situation almost overnight by implementing measures to encourage and incentivise Australians to become landlords.

The big problem, which has been building now for many years, is that the nation has a chronic shortage of people willing to take on the task of being landlords – buying an investment property and making it available for others to live in.

Government doesn’t perform this role and neither does big business. Over 90% of the homes that people rent in Australia are provided by mum-and-dad investors – but fewer and fewer people are willing to do it, at a time when the costs of doing so are unattractively high and the rules and regulations keep changing to the distinct disadvantage of the owners.

Governments caused this rental shortage and they keep making it worse. So rental vacancies are unlikely to improve in the foreseeable future.

And while that remains the case, there will continue to be upward pressure on rents and an absence of choice for people who need to rent or choose to rent.

Four years ago, the median weekly rent for a house in Australia was around $440 – today it’s over $700.