Rent affordability in Australia has fallen to its worst levels in nearly a decade, with the average household spending a third of their income on rent, as the effects of the Covid pandemic are still being felt in the market.
Low-income families pay more, with more than half of their income going to rent, according to new research from ANZ and CoreLogic.
ANZ’s CoreLogic Housing Affordability Report found that the cost of rent—the portion of income required to service a new lease—has reached its highest level nationwide since June 2014, with 30.8% of median income required to service a new lease.
Perth saw the worst deterioration in housing affordability for low-income households between March 2020 and March 2023, while Hobart had the worst housing affordability figures, with nearly 60% of income needed to pay rent.
Melbourne only saw a small decline in the portion of income required to pay rent for low-income households, due to income growth at the 25th percentile level.
Sydney remains the most affordable market for home ownership. The report found that, on average, Sydney residents paid more than half of their income for a mortgage, and it would take about 12 years to save up enough for a 20% deposit.
The report attributed much of the pressure on the housing and rental market to supply, a release intertwined with the onset of the pandemic. Rising construction costs and interest rates have also pushed more people into the rental market.
Felicity Emmett, chief economist at ANZ, said that while the affordability figures were not surprising due to the rent crisis, they did mean that more people would be forced into difficult living situations.
“To someone [spending] 50% of their income from their rent means there is very little left over for anything else.
“It actually means that these people in the 25th percentile of income are really going to struggle to pay their rent and potentially have to either have to live with more people and share the costs, or they may be trying to find government subsidized housing, and some may have to move to homelessness provisions.” .
“Besides the decline in social housing, pressures on rent demand are being felt across all income groups.”
The annual percentage of approvals for real estate where the dwelling will be owned by a government agency has fallen from around 9% in the 1980s to just 1.6% over the past five years. After a brief spike in public sector housing approvals in 2009 and 2010 – a government social housing initiative from Rudd in response to the global financial crisis – the decline in social housing has continued in the years since.
PropTrack data showed that rents have risen as much as $600 per week over the past year in some suburbs.
Another report from the Australian Institute of Housing and Urban Research found that the pandemic continued to affect supply and demand in the housing market.
The report, produced by researchers from Curtin University and Monash University for AHURI, found that the pandemic had shifted supply via an “increase” in detached housing and a “collapse” in apartment development.
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Researchers found that changing lifestyle choices, along with construction delays, labor shortages and increased material costs, slowed supply.
The pandemic has changed what people want from their homes, the report said, as residents seek more space indoors and outdoors and demand for “lifestyle sites” has increased amid a boom in work-from-home arrangements.
Professor Stephen Rowley, lead author of the report, said the multi-residential sector has been mostly affected by the conditions created by the pandemic, with many developments “no longer profitable”.
“The pandemic has shown us how quickly housing demand can change, with a shift to homebuyers wanting to escape urban areas; to larger homes and more private space; and to working from home in lifestyle locations.”
Existing property owners are reluctant to sell due to the lack of options available to buy. A tight rental market means that rent between selling, and buying a home is difficult.
This will have serious ramifications for the housing markets over the next two years, contributing to a housing shortage. The lack of new supply and strong population growth mean upward pressure on both prices and rents – not good news for potential buyers or anyone in the rental market.”
The report predicted that it would be “extremely difficult” in these circumstances to provide one million new homes by the end of the decade, adding that the housing market is ill-equipped to deal with any major changes such as the pandemic.
“Supply chains are very weak and can quickly cause significant delays and significantly increase project costs,” the report states. “The new housing supply pipeline, especially for high-density products, can be shut down very quickly due to higher construction costs. The return to work is much slower.”
