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An Expat’s 2023 Guide to The State of the Current Rental Market in Australia

Are you planning to rent a property in 2023 in Australia? After the pandemic restrictions, border closures and economic uncertainty, the rental market in Australia is currently in crisis. If you are joining open viewings with hundreds of other eager tenants or facing a high rental increase and wondering why is this happening, then this is the blog for you.

I will provide an overview of the current state of the rental market in Australia so you can understand why it could take longer than usual to secure your rental contract.

Australia's Rental Market in 2023

Australia’s rental market is at an all-time high in 2023 with Sydney being the most expensive out of all the capital cities.

Rental prices in Australia

The Sydney rental market has recorded a 24% increase in rental prices in 12 months, as of March 2023. To put this into perspective:

  • CPI inflation rate in Australia rose by 7% from 2022 to 2023
  • The minimum wage only increased by 5.2% in 2022 in Australia

The rental crisis in Australia has seen weekly rents, in Sydney in particular, rise at a faster rate than both inflation and average wages. Whereas Canberra only increased by 1.90% in 12 months, making it an affordable capital city compared to the rent rises in other states.

Cities like Adelaide, Perth and Melbourne remain Australia’s most affordable cities to live during the rental crisis in 2023.

Why is the rental market so bad in Australia in 2023?

1. Rental supply and demand

One of the biggest factors affecting the rental market in Australia is the supply and demand imbalance. According to recent reports, there is a shortage of rental properties in many major cities, especially in Sydney and Melbourne. Also, there are record high, low vacancy rates for the rental properties they do have. As a result, rents are increasing, and competition for available properties is fierce. On the other hand, some regional and rural areas are experiencing an oversupply of rental properties due to the pandemic and migration patterns.

2. A drop in sufficient new housing

Australia has seen a drop in new buildings being built for many reasons but in particular:

  1. COVID-19 pandemic – Construction costs escalated and materials were hard to source which caused many building contracts to collapse and some businesses faced closure before finishing.
  2. New regulations – Rules on overseas buyers has seen higher fees and tighter restrictions causing many investors to turn away from the Australian market.
  3. Weak confidence in “off-the-plan” apartments – Defects in many new apartment blocks have caused many changes in investment decisions.

Property investors are not investing as highly in the housing market and the low supply of properties are in high demand.

3. An increase in owner occupiers

During the pandemic when borders closed and the rental markets dipped, many property investors sold their houses and apartments. There was a boom in the affordable housing market as Australians jumped on the chance of owning their own property. What was once a large rental housing market is now primarily occupied by live-in owners. Which is great news for new owners and sad news for tenants.

4. Rental prices increase for mortgage inflation

With the supply and demand imbalance, rental prices in many parts of Australia have been on the rise. In some cases, rental prices have increased by as much as 10% or more. The median weekly rent in Sydney and Melbourne is now over $500, making it difficult for many people to afford a rental property in these cities. However, in some regional areas, rental prices have remained relatively stable or even decreased, making it a more attractive option for renters.

5. Post Covid-19 rent increase

The COVID-19 pandemic has also had a significant impact on the rental market in Australia. Many renters have experienced job loss or reduced hours and low incomes, making it difficult to pay their rent. As a result, many landlords have offered rent reductions or deferrals to help their tenants through this tough time. However, with the economy starting to recover, landlords are beginning to phase out these arrangements, which could lead to higher rents and financial stress for renters.

6. Internal migration

During the pandemic, with many of us working from home, a mass amount of people moved out of capital cities to rural areas. As we return to normal, internal migration has increased as many people are moving back into cities, causing a huge amount of rental demand.

7. Overseas arrivals as international borders open

For a number of years during COVID restrictions, it was difficult for international students and skilled workers to obtain a visa and enter Australia. As many cities now face worker shortages, international visitors are being encouraged to move down under. Many of these people will require rental accommodation until they become permanent citizens which has added to the stress on the rental crisis.

8. Short-term rentals

The rise of short-term letting opportunities such as AirBnB has seen long-term rental housing being taken off the market. Investors are able to make more rent income from online platforms in high tourist areas and international visitors return. Unfortunately, these properties sit vacant waiting for tourists whilst tenants struggle to find long-term housing in their local areas.

Conclusion

In summary, the rental market in Australia is currently experiencing a supply and demand imbalance, which is causing rental prices to rise in many major cities. The impact of COVID-19 has also led to housing stress for renters, as landlords are starting to phase out rent reductions as the economy recovers.

If you’re planning to rent a property in Australia, it’s important to do your research, be prepared to negotiate, and consider alternative options, such as regional areas or share housing, to find an affordable rental property.

However, don’t let this put you off from moving to Australia! With the skilled workers shortage, there are many incredible job opportunities to take advantage of. Plus, did I mention the beaches?

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