Record Lack of Cheaper Rentals Hits Low-Income Households

The share of properties listed for rent for less than $400 a week has fallen to record lows, according to PropTrack which monitors rental markets.

The shortage of rental stock across Australia is impacting all renters but it is acutely affecting lower income households, as highlighted by the significant reduction in properties available to rent under $400 a week.

In September, properties listed for rent for under that price point fell to a record low of 19.3 per cent of listings, halving from a peak of 41.8 per cent in March 2020.

Capital city rental listings under $400 a week now represent just 16.4 per cent of total advertised listings, down from a peak of 36.1 per cent in March 2020.

Currently no capital city market has more than a quarter of listings below $400 a week in September 2022.

In Sydney, one in five rentals were advertised under $400 a week a year ago, but that has now sunk to one in 10.

In Hobart, Darwin and Canberra, fewer than one in 10 rental listings were for properties costing less than $400 a week.

Meanwhile, Melbourne, Adelaide, and Brisbane have seen the biggest drop in the share of listings available to rent under $400 a week over the past year.

Listings for rental properties in regional areas under $400 a week represent just 28.2 per cent of total listings after falling from a peak of 57 per cent in March 2020.

PropTrack economist Angus Moore said the record low came down to low vacancy rates and lack of rental options.

“The main reason that we’re seeing rents grow as quickly as we are at the moment is that there just aren't a lot of rentals available,” Moore said.

“Vacancy rates are extremely low, the number of rentals listed on realestate.com.au is well down compared to where it was pre-pandemic, and in capital cities they’re down even compared to where they were a year ago.

“With supply of rental listings continuing to tighten and competition for stock heating up due to low levels of first-home buyer purchasing and increasing migration, we expect the supply of affordable rental listings under $400 per week to reduce even further over the coming months.”

Share of listings under $400 a week

Tenants searching for a new home are facing a tough outlook with national rental vacancy rate holding at 0.9 per cent for the past three months.

The total supply of advertised rental stock is now 35.4 per cent below the previous five-year average.

Off the back of dwindling supply and a tightly held rental market, rent prices nationally have surged by 10.3 per cent over the past 12 months. Seven of the eight capitals saw dwelling rents rise over the quarter and year. Canberra was the only capital city market that recorded a quarterly fall in dwelling rental values.

Corelogic research analyst Kaytlin Ezzy said since August 2020, national dwelling rents have surged almost 20 per cent, equivalent to a weekly rent rise of about $90 a week.

“The past few years has seen unprecedented growth in rental values,” Ezzy said.

“Initially driven by a reduction in the average household size, the continued upswing in values is likely now predominantly being driven by the strong return of overseas migration, coupled with extremely tight rental supply.”

The pace of rental growth has started to ease after recording the smallest monthly increase this year, up 0.6 per cent in the month to September and 2.3 per cent over the September quarter, suggesting affordability constraints are having an impact.

Ezzy said the easing in rental growth was a little surprising, particularly given such low vacancy rates.

“The slow down in the rate of rental growth may suggest an increasing number of prospective tenants are starting to come up against affordability constraints,” Ezzy said.

“As high non-discretionary inflation, along with increasing rents put additional stress on a renter’s balance sheet, it is likely a growing number of tenants look to reform larger households or find more affordable rental options in an attempt to reduce costs.”