AUSTRALIA’S ANNUAL RENT BILL BLOWS OUT BY $44 BILLION PER ANNUM OVER THE LAST DECADE

Kevin Young, President of Property Club, Australia’s largest independent property investment group, has highlighted a concerning trend regarding the financial strain faced by renters across Australia. According to Mr. Young, a government-engineered rental crisis has resulted in an additional $44 billion per year being imposed on renters nationwide.

Over the past decade, the median weekly rent in Australia has doubled, skyrocketing from $300 to over $600. This exponential increase means that Australian renters collectively shell out nearly $250 million in rent every day. Meanwhile, full-time adult average weekly earnings have only risen by 30 percent during the same period, reaching $1953. This stark contrast illustrates that rents have surged at more than three times the rate of wage growth.

Mr. Young points out that this rental crisis is especially burdensome for low and middle-income renters, who struggle to keep up with rising rents amid other cost-of-living pressures. He predicts that the situation will worsen with a significant influx of migrants to Australia, exacerbating the housing demand-supply gap.

To swiftly address the rental crisis, Mr. Young proposes two key policy reversals by the Federal Government. Firstly, he calls for the reinstatement of depreciation benefits associated with owning second-hand properties, which were abolished in 2017. This change disincentivized property investors from purchasing cheaper second-hand rental properties, thereby reducing the availability of affordable rental options.

Secondly, Mr. Young urges the Federal Government to reintroduce interest-only lending without time limits for property investors. The imposition of time limits on interest-only loans by the Australian Prudential Regulation Authority in December 2014 forced many mom-and-pop property investors to sell their rental properties, as they could not afford principal and interest loans after being forced to switch repayment methods.

Mr. Young warns that without prompt action, rental prices will continue to soar, potentially driving thousands of Australians into homelessness. He emphasises the urgent need for the government to reverse these detrimental policy decisions to prevent the rental crisis from escalating into a nationwide homelessness crisis.

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Australian Property Prices Surge Despite Increased Listings

The latest data from the PropTrack Home Price Index reveals a robust surge in property prices across Australia during March, even amidst a rise in property listings as homeowners aimed to capitalize on the prevailing strong market conditions in most capital cities.

Australian home values experienced a notable increase of 0.34% in March, with the median price in capital cities rising by 0.4%. This upsurge has propelled Australian property prices to reach unprecedented highs, building upon the gains observed in the previous month.

Sydney, Australia’s most expensive city, witnessed a remarkable 8.61% surge in house prices over the past year, driving the median value of a typical house to $1.369 million, marking a substantial increase of approximately $111,000 compared to just a year ago. Similarly, property prices in Perth, Brisbane, and Adelaide have also soared to record highs, according to the latest data.

PropTrack’s senior economist, Eleanor Creagh, attributes this surge in property prices to the persistent demand from homebuyers, which has effectively absorbed the surge in property listings, resulting in further price escalations. Despite an increase in the number of homes hitting the market, the demand-supply imbalance continues to exert upward pressure on prices.

The Reserve Bank’s decision to maintain interest rates steady last month, coupled with expectations of potential interest rate cuts in the future, is anticipated to further fuel home buying activity. The prospect of lower interest rates is likely to bolster buyer confidence and stimulate the housing market.

In Perth, where housing supply remains constrained, strong population growth has driven property prices to unprecedented levels, recording the highest home price increase among the capital cities in March. The Western Australian capital now boasts the strongest property market in the country, with house prices surging by 19.25% over the past year.

Amidst these market dynamics, the unit market has also witnessed significant growth, outpacing house prices with a 2% rise so far in 2024. The relative affordability of units, coupled with strong demand for inner-city living post-pandemic, has contributed to the buoyancy observed in the apartment market.

As property prices continue to surge and market conditions evolve, the Australian real estate landscape remains dynamic, presenting both challenges and opportunities for homebuyers and sellers alike.

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Rising tide of unit rents closes gap with houses in major capitals

MCG Quantity Surveyors is proud to announce the release of its landmark report, ‘Rising Tide of Unit Rents Closes Gap with Houses in Major Capitals,’ shedding light on trans-formative trends in Australia’s rental market over the past year. This in-depth analysis underscores a narrowing affordability gap between house and unit rents in Australia’s leading capital cities: Greater Sydney, Greater Melbourne, and Greater Brisbane, highlighting significant implications for renters and investors alike.

“The findings of our report reflect a remarkable shift in the rental market dynamics, with unit rents experiencing a surge that is narrowing the affordability gap with houses in 3 of our major capitals,” says Mike Mortlock, Managing Director of MCG Quantity Surveyors. “This is indicative of a deeper change in the market, influenced by evolving preferences and housing market conditions.”

In Greater Sydney, the data reveals a consistent rise in house rents from $650 in February 2023 to $700 by February 2024, while unit rents jumped from $540 to $650 over the same period. “The accelerated growth in unit rents compared to houses suggests a strong demand for more affordable, centrally located living options,” Mortlock notes, highlighting the potential drivers behind this trend.

Greater Melbourne and Greater Brisbane follow a similar pattern, with both cities witnessing a significant increase in unit rents, closing the gap with house rents. Melbourne’s unit rents rose from $430 to $520, and Brisbane’s from $470 to $550, underscoring the appeal of urban living and the growing demand for units. “These trends are not just numbers; they tell the story of Australians’ shifting lifestyle aspirations, with a clear tilt towards higher density living options,” Mortlock elaborates.

This shift has implications for both renters, who now find the price difference between choosing a unit over a house diminishing, and investors, who are seeing units emerge as an attractive investment proposition. “For investors, the rising unit rents in inner-city areas point to a potentially higher yield in the short to medium term. However, this opportunity comes with considerations such as strata fees and the ongoing supply of new developments,” advises Mortlock.

MCG Quantity Surveyors’ report, ‘Rising Tide of Unit Rents Closes Gap with Houses in Major Capitals,’ serves as an essential guide for stakeholders across the real estate spectrum. By providing a nuanced understanding of current market trends, the report facilitates informed decision-making for property investment, urban planning and housing policy.

“For those navigating the complexities of the Australian rental market, our report offers not just insights but a roadmap for understanding the evolving landscape of housing affordability,” concludes Mortlock. “It’s crucial for both renters and investors to stay informed about these trends as they shape the future of our cities.”

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