CoreLogic’s latest rental report has laid bare the rapid rise in rents that are squeezing many in regional Australia.

The figures, released yesterday, showed that rents have increased nearly 9% year-on-year, with the bulk of those rises outside of the major capital cities.

Rents were still up in the cities, rising 7.5%, but in the regions, it was 12.5%, with lack of supply and increase in people moving out of the cities cited as the major drivers of the increase.

It represents good short term news for investors, as rental yields are higher, but also a potential long-term problem as raising rents cause an affordability crisis in regional areas.

“Since early 2017, when APRA brought in regulations that investors had to have double deposit and to pay an extra 0.5% in interest, there have been fewer rental properties available,” said Peter Koulizos, CEO of the Property Investment Professionals of Australia.

“Therefore, supply has decreased and has been decreasing significantly. It wasn’t very noticeable because vacancy rates were decreasing slowly and rents were increasing weakly, but since Covid, there has been a lot of shifting.”

“People have been moving from the cities to regional areas, and so now, the lack of investment properties has been blown out of proportion because there’s been such an influx of people into regional areas.”

“Supply is inelastic. You can click your fingers and change demand, through HomeBuilder grants or interest rate changes, but you can’t click your fingers and increase supply.”

“Let’s not forget: international borders have been shut for two years. When these new migrants come back, where are they all going to live?”

The rental crisis could be solved via three measures, said Koulizos.

“The way I see it, there’s a three-pronged attack,” he explained. “First, you need to encourage the private investor to supply more rental property, similar to the NRAS program of ten years ago. Secondly, you need the government to increase housing stock.”

“Thirdly, you would ideally have the private and public sector working together in joint venture projects to supply rental properties for low to middle income families, because they’re the ones who are at greatest risk.”

Mike Wood, Broker News, 27 October 2021
https://www.brokernews.com.au/news/breaking-news/affordability-crisis-looms-as-regional-australian-rents-rise-12-5-in-a-year-279029.aspx