The Limits Of The Australian Rental Markets

As it stands there are serious problems with the Australian rental market. The source of the issue, at this point, is real shortage in available properties. Worse still, there is every indication that this lack of open units will persist for the remainder of the year. One result of the shortage is that the median rent cost has increased during the March quarter to a point that it is clear there will be sustained increases during 2011.

This last point was outlined in the recently issued Australian Property Monitor’s Rental Price Series Quarterly Report. It points out that the combination of fewer vacant rental properties with 2010’s continuous rate increases has made it much harder for new renters to enter the rental market no matter where they are in Australia.

There was a rapid 2.3% increase in the cost of rentals on a national level, indicating higher demand in the capital cities. The AMP report also mentioned that national house rentals rose by 0.1% during the quarter.

Getting specific, median rent on Sydney houses increased 1% to $485. Units saw 2.3% increased to $450 a week. Canberra and Adelaide rental homes had price rises of 2.2% and 3% respectively during the quarter. The units in these and all the other capital cities increased except for Hobart and Brisbane where the entire markets for rental properties remained unchanged.

The current demand for rental units in cities like Melbourne, Canberra, and Darwin pushed up the prices on rent above the national average. The floods in Brisbane have ensured there are unit and home shortages which will affect the performance of the rental market in that city.

Dr. Andrew Wilson, a senior economist for the APM, foresees substantial growth in rental prices as 2011 unfolds. Much of this growth is being fueled by increase economic activities as well as shortages in housing and the slowdown of first home buyers in the market.

Increased demand for rental units is clear when it is understood how low the vacancy rates for these types of properties are in many inner-city areas of Australian’s major cities. This means that there is also an increasing amount of competition among potential tenants to secure a property.

There are signs that all of this tension may ease as increased yields on rentals foster new investor interest who may want to enter the rental market. This could be a welcome relief to renters who will have more options open to them over time.

These new developments may not come in 2011 but they are likely to come online in the coming years. This means that there will be intense price hikes, especially in the cities. Yet, the demand for rentals is not expected to abate.

Amid all of this speculation, the issue of finding affordable housing continues to cause political tensions since future developments have been adjusted to compensate for the economic and housing losses due to the Queensland floods. Millions of dollars were funneled in to fund the relief efforts there from the National Rental Affordability Scheme.

The future rental market develops will be determined as much by market forces and the state of the Australian mortgage markets as they will the forces of nature. There is some promise that there will be a profitable rental market in the next few years. In the mean time, you may have to deal with higher prices and longer waits.

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