- Property investors on the market are dwindling according to PIPA
- PIPA chairman says this will place pressure on an already tight rental market
- He warns this will only worsen when borders open
With rental markets tight, the Property Investment Professional Association (PIPA) is drawing attention to another factor that he believes is placing pressure on the market – a lack of property investors.
A survey from earlier this year found that rental stress is high and rising*, with more than two-thirds of tenants reporting rental stress.
PIPA Chairman Peter Koulizos explained that an imbalance between tenant demand relative to property supply has been intensifying since what he describes as over-zealous lending restrictions targeting investors came into effect in 2017.
“The volume of investors has been trending up over the past few months, but the fact
that they were generally stuck on the sidelines for a number of years means there is
a significant rental property deficit in most parts of the nation,” Mr Koulizos said.
Investors accounted for around 35% of properties on the market from about 2007 to 2017 but this figure has been lower in the last four years according to PIPA’s analysis of recent lending data.
As shown below, SQM data reveals that the national rental vacancy rate had a peak of 2.9% in 2016. However, since the begging of 2020, it has been on a mostly steady decline.
National residential vacancy rates
“The national vacancy rate is now just 1.7 per cent, according to SQM Research,
with some areas having rental markets that are critically undersupplied,” said Mr Koulizos.
He gave Adelaide and Perth, with vacancy rates of 0.6%, as examples, as well as Hobart with just 0.5%.
“This is happening during a period when our population is missing hundreds of
thousands of new overseas migrants each year as well,” he said.
“Even Sydney’s vacancy rate [reduced] to 2.7 per cent over recent months.”
Rental price pressure
Lowered supply has placed upwards pressure on asking prices.
“Since December 2016, national weekly house rents have increased by nearly 24
per cent and national weekly unit rents have jumped by 20 per cent,” he said.
National weekly asking prices
“As we know, wage growth has been mostly stagnant over the same period of time,
so how are people expected to find the additional funds that are required to lease a
property?”
“When the next wave of overseas migrants’ lands here in coming years, where are
they going to live? Migrant accommodation camps like the 1950s? Something needs
to be done – and it needs to be done now.”
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* ‘Rental stress’ is considered to be when rental payments account for more than 30% of household disposable income.
