Short Stays Add Fuel to Rental Crisis

Residential rents are tipped to rise sharply in the coming months as rental supply dwindles and demand ramps up following the return of international migrants and students. 

The proportion of available rental homes across all capitals dropped by 0.1 of a percentage point to 1 per cent in May—the lowest level in 16 years, according to SQM Research.

It follows an easing in rental conditions in April when vacancy rates lifted by 0.1 of a percentage point to 1.1 per cent—the only increase since the start of the year.

SQM managing director Louis Christopher said the retightening of vacancy rates meant that almost 36,500 properties were untenanted across the country.

“There is nothing yet in the data that would suggest we are about to see a reprieve,” Christopher said. 

“The national rental crisis continues on, unabated, and as a result, asking rents are skyrocketing.”

Vacancy rates contracted in Sydney and Melbourne to now be 1.5 per cent and 1.7 per cent respectively, their lowest levels in years. Meanwhile, Brisbane’s vacancy held at 0.7 per cent.

The number of vacant properties on the market in Sydney, Melbourne and Brisbane has now halved since May, 2021.

In the smaller capital cities of Brisbane, Perth, Adelaide, Canberra, Darwin and Hobart vacancy rates sat below 1 per cent.

Rental markets across Perth, Adelaide and Darwin tightened during the month, while Canberra and Hobart remained unchanged at 0.7 per cent and 0.4 per cent respectively.

Vacancy rates - May 2022

Capital city asking rents notched up another 2 per cent increase in May with the 12-month rise standing at 15.6 per cent. Capital city house rents are up 15.8 per cent over the past 12 months while unit rents have risen by 14.8 per cent.

Sydney combined rents have risen by 17.5 per cent over the past 12 months while Melbourne’s have lifted by 14.8 per cent. Brisbane is up by 18.6 per cent for the same period. 

A typical Sydney house is now being rented for $814 after lifting by 4.6 per cent in May while a unit averages $521 after a 3.7 per cent increase.

A typical house in Melbourne and Brisbane rents for $559 and $610 respectively, after marginal gains over the month.

Adding to the rental squeeze has been an increase in short-stay rentals being brought online during the pandemic.

In response, real estate agents are reporting that an increased number of renters are attending open homes, with some even paying 12 months’ rent in advance to secure a place.

Airbnb, which has a market capitalisation of over $100 billion, has been accused of driving up the cost of traditional rental properties as landlords have taken properties out of the long-stay rental pool to make more money by offering them as short-stay holiday accommodation.

According to figures from data group AirDNA, there are about 100,000 Airbnb properties across Australia, 85 per cent of which are entire homes.

“Reductions in household size, short-term-stay listings eating into longer term lease availability and now the likely rise in immigration levels, are all factors contributing to this crisis,” Christopher said.  

“There will also be ramifications for headline inflation once the Australian Bureau of Statistics update their rental series with the actual market.”

In an attempt to temper the growing short-stay rental trend, state governments and councils have been looking to implement a raft of new measures.

In Brisbane, lord mayor Adrian Schrinner has mooted plans, as part of the state budget, to force more home owners to return their short-stay rental properties to the general rental market or face a 50 per cent rate hike.

The rate hike will directly target owners of entire properties listed for overnight stays.

Further north on the Sunshine Coast, Noosa City Council this year introduced a $950 registration fee for short-term accommodation properties, amid a crackdown on short-stay properties in the region.