34% of income is spent on rent in Hobart, according to a new report. Image – Canva
  • Perth’s rental affordability score has decreased the most over the past year
  • Both Greater Sydney and Melbourne have improved in affordability
  • The trend of declining affordability in the ACT has ceased

Greater Hobart is the least affordable capital city in Australia for the average rental households of each city, according to the 2021 Rental Affordability Index.

The report found “the improvement in affordability during the second quarter of 2020 was short lived, and rents have continued to rise rapidly, pushing affordability to a historic low point.”

Perth’s rental affordability score has decreased the most over the past year, at 14%, meaning it’s now less affordable than Sydney and Melbourne.

This comes after Perth was previously once the most affordable capital city.

Greater Adelaide has placed as the second least affordable capital city, as incomes have failed to keep pace with rising rents.

Both Greater Sydney and Melbourne have improved in affordability, both during the COVID-19 pandemic and over the longer term with their RAI scores increasing by 3% and 7%, respectively.

The trend of declining affordability in the ACT has also ceased over the nine years measured in the index.

The improvements in Sydney, Melbourne, and the ACT, have been primarily driven by static rents, followed by steep declines due to the effects of the COVID-19 pandemic on Australia’s two largest cities.

The report states, “even in cities with improved affordability, the tangible improvement for very low-income households is negligible, as they still face severely unaffordable rents in most metropolitan areas.”

National RAI trends – metropolitan areas (June 2021)

Region RAI Share of income spent on rent Relative unaffordability
Greater Sydney 126 24% Acceptable
Greater Melbourne 148 20% Acceptable
Greater Brisbane 121 25% Acceptable
Greater Adelaide 110 27% Moderately unaffordable
Greater Perth 125 24% Acceptable
Greater Hobart 87 34% Unaffordable
ACT 119 25% Moderately unaffordable

Source: SGS Economics and Planning, 2021

International tourism and students

The report stated, “the collapse of international tourism and student demand has meant that rental rates for one bedroom and two-bedroom dwellings have experienced the greatest decline, leading to the greatest improvement in affordability for households who require these forms of housing such as singles, couples without children, or small families.

“However, this has coincided with rising rents for larger dwellings, intensifying pressure on family households who require dwellings of 3 bedrooms or larger.”

Australia’s affordability problem

Nationwide, the proportion of households renting is on the rise, having increased from 27% to 32% between 1997 and 2018.

Over the same period, the proportion of public housing tenants halved, from 6% to 3%.

With less social and affordable housing stock available than there was a decade ago, more low-income Australians are pushed into the private rental market and forced to pay unaffordable rents.

43% of all low-income households are in housing stress, compared to 35% in 2008. This rises to 48% for households in NSW.

Australian Housing and Urban Research Institute estimates 1.3 million households need additional housing assistance

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