Australia is in the grips of rental crisis which has shown no signs of abating until recently.
With population growth booming and new housing supply failing to keep up, every sign pointed to a worsening of the rental crisis.
But over the past few months, not only have rents held steady, but vacancy rates have started to rise, giving renters a little more breathing room.
So, how is it possible conditions are easing at a time when the undersupply of housing is worsening? The answer is a return in investors.
Comparing the first five months of 2024 with the same period last year, the number of new loan commitments (excluding refinancing) to investors was 24% higher.
In contrast, the number of new loan commitments to owner occupiers rose by 8% over the same period.
Nowhere has the return of investors been stronger than in Western Australia, where new loan commitments to investors are up a staggering 53 per cent year-on-year.
While there’s no question the return of investors in Western Australia is contributing to the speed at which home values are rising, it is easing conditions for renters.
In fact, Greater Perth saw the largest rise in vacancies of any capital city over the 12 months ending June. For nearly two years, the share of rental properties sitting vacant had remained stubbornly below 1%, hitting a low of just 0.77% in February last year.
But over the past year, surging investor activity has resulted in more homes being listed for rent in Greater Perth, with the vacancy rate rising to 1.25% in June. This was the highest rate of vacancy seen in three years.
Queensland and New South Wales have recorded the next largest jumps in investor activity this year, with new loan commitments up 29% and 25%, respectively.
Again, more investor activity has supported a rise in rental listings in these markets, which has contributed to a rise vacancy rates, despite population growth.
But not all markets are attracting more investors.
New loan commitments to investors in Victoria were up just 11% this year, with more investors continuing to sell than buy. While the investor sell off is good news for owner occupiers looking to buy in Victoria, it has dire consequences for renters.
What’s more, with the Victorian government seemingly bent upon chasing more investors out of the market, security of tenure is deteriorating for renters, with more being forced to vacate as owners sell.
As the state forecast to see the strongest population growth over the next five years, the investor sell off is likely to have dire consequences for Victoria’s rental market.
New migrants are more likely to be renters than owner occupiers for at least the first five years, and with Victoria forecast to see net overseas migration of 457,400 over the next five years, the investor exodus will have dire consequences for the state’s rental market unless it is reversed.
