- Rental markets are tightening as Australians move away from share houses and denser living
- Ultra-low interest rates and fear of missing out are pushing house prices to new highs
- Things should “calm down” later this year, as buyers become more circumspect and supply returns
Rental markets are tightening as Australians move away from share houses and denser living, and household sizes within the rental pool may also be declining, according to a new ‘Residential Property Risks and Opportunities’ report.
The report describes a “chronic” shortage of rental properties across many suburban, outer suburban, coastal, and regional locations, with “surging rents” expected in the June 2021 quarter.
According to SQM Research, the total number of listings in the rental market has been on a steady decline, from about 105,000 in April last year to 81,000 today:
For Sale market
Ultra-low interest rates and fear of missing out (FOMO) are pushing house prices to new highs with double-digit annual growth in many areas around the country.
However, the report does expect things to “calm down” in the second half of the year, as buyers become more circumspect and supply returns to the market.
Doron Peleg of RiskWise Property Research said that the firm’s latest report confirmed the expected strong performance of the Australian housing market this year.
“As previously projected, the housing market has shifted through the gears to the point where FOMO has become a major factor.
“It remains likely that the ultra-low interest rate environment will remain in place for at least for the next 24 months, and possibly longer.”
Doron Peleg, CEO of RiskWise
This, combined with low availability of stock of quality assets in popular areas, has been reflected in very strong auction clearance rates and rising prices.
It is projected that both Sydney and Melbourne will deliver double-digit price growth in 2021. Many other regional centres, with populations in excess of 100,000 – so-called SA4 areas – may do likewise.
“Houses with a high land value component and scarcity value are likely to enjoy very strong demand and capital growth, both in the short and long term. Our key underlying assumption is that the COVID-19 vaccinations that have been rolled out will provide a sustainable solution to the virus over time”.
A high degree of uncertainty in relation to immigration will likely affect the demand for inner-city rental apartments.
“There are plans afoot to start bringing international students into Australia, which will take the pressure off inner-city rental markets.
“But the risks of extended border closures, combined with high vacancy rates and increased serviceability risk, have made inner-city apartments less attractive to investors, who represent the main cohort of buyers in those areas,” said Pete Wargent, co-founder of BuyersBuyers.
Source: ‘Residential Property Risks and Opportunities’, May 2021, RiskWise Property Research.