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Tenants losing a quarter of income on rent

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Rent increases are now more common, and larger on average, with properties changing tenants experiencing larger rent increases than existing tenancies. 

These are the findings from an RBA study into the private Australian rental market, published 23 April. 

The study found that since 2021, rents have increased across inner-city and regional areas throughout all Australian states and territories. 

The findings are in direct contrast to the experience during the COVID-19 pandemic, where rents fell in many suburbs close to central business districts but increased in regional areas. 

Real estate experts say this was driven by a preference shift among many households for more space and net population flows. 

The 2019/20 Survey of Income and Housing (SIH) showed that renters tend to have lower incomes and spend a larger share of their disposable income on housing costs compared with owner-occupier households. 

In fact, the median private renter spends around 26% of their weekly income on rent. 

The study, conducted by Fred Hanmer, an economist in the RBA’s Economic Analysis Department, found that during the COVID-19 pandemic, lockdowns and health concerns prompted many Australians to desire more space and to live with fewer people. 

More recently, the return of international migration – and, in particular, the return of international students – has added to demand for rental properties in the major cities.  

Tenants are the losers in today’s market it can be deferred, with suitable rental properties even more difficult to find thanks to advertised rents increasing in price, and vacancy rates declining. 

In February 2023, the median weekly rent amount was highest in the ACT at $560 per week and lowest in South Australia at $380 per week. 

Around 90% of lease agreements are for 12 months or less, with the bulk of these 12-month leases. 

The share of six-month leases has declined since early 2021 in favour of 12-month leases. 

REINSW CEO Tim McKibbin says vacancy rates in the Hunter are indicative of an Australia-wide issue. 

“We have affordability issues, and we have supply issues. We see queues down the street of people trying to acquire a rental property and that is only going to get worse unfortunately,” he said.  

“We are seeing landlords electing to put their money in other markets.  

“They’re leaving the residential tenancy market in favour of other opportunities.  

“Some landlords are removing their property from the residential tenancy market and moving it across to the holiday and short-term rental space – we’re seeing this in Nelson Bay.  

“Commercially that can look more attractive, and you may also gain more control over your property, but it doesn’t help affordability issues and supply issues.” 

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