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The dream of homeownership feels increasingly out of reach for many Australians, who are also reeling under the worsening affordability conditions in the rental markets.
ANZ and CoreLogic’s latest Housing Affordability report found that an undersupply of rental accommodation and an increase in renters is deteriorating affordability.
According to the study, the portion of income required to service a new lease is at its highest level since June 2014 — renters in Australia need to set aside 30.8% of their income to service a new lease.
The conditions are worse among households at the lower household income level — 51.6% of income would be required to service new rent.
ANZ senior economist Felicity Emmett said heightened economic uncertainty has seen a decline in sales volumes in the private market and an increase in those seeking rental accommodation.
“Paired with a decline in social housing, rental demand pressures are being felt in all income brackets,” she said.
Looking at the supply of rental properties can explain why rents have become increasingly expensive.
In April 2023, rental vacancy rates were at 1.1% nationally, which is below the decade average of 3%. Meanwhile, listings are 38.1% below the 10-year average.
Demand has been a great contributor to the thinning of supply — an increase in regional migration during the pandemic led to increased rent values and low vacancy rates in both regional Australia as well as major cities.
In fact, rent values increased more across regional markets at 28.8%, compared to 24.4% in capital cities since March 2020.
CoreLogic Australia head of research Eliza Owen said rental demand has undergone extraordinary shifts over the past three years, with fewer people per household requiring more dwellings coupled with a strong return in overseas migration.
"As rents have risen sharply, the increase in the cash rate, and pressures in the construction sector have slowed the rate of dwelling completions — this has meant investor conditions are not ideal and has stemmed the flow of new rental properties to the market,” she said.
Affordability constraints are greater in homeownership, as evidenced by latest lending statistics indicating Sydney as the most unaffordable market for homeownership.
In fact, it would take 51.6% of income, on average, for Sydneysiders to afford a new mortgage. It would also take them 12 years to come up with the 20% typical home loan deposit.
The deposit barrier, combined with higher building and construction costs, is pushing more people out of the housing market. This adds to aggregate rental demand.
The report said a larger share of higher income and older households are now in the rental market as homeownership declined.
A study from UNSW Sydney found that many around four in five first-home buyers think the buying process had become harder and more complex.
UNSW discipline director of construction management and property Chyi Lin Lee said economic policies, even those aimed at promoting homeownership, may have been to the detriment of first-home buyers by driving up demand for housing and overheating the market.
“The pandemic saw extraordinary economic responses from the government to stabilise the economy and businesses, but they arguably had unintended consequences for first-home buyers that put them in a more disadvantageous position than before the pandemic,” he said.
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | LVR | Lump Sum Repayment | Additional Repayments | Split Loan Option | Tags | Features | Link | Compare |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
6.04% p.a. | 6.06% p.a. | $2,408 | Principal & Interest | Variable | $0 | $530 | 70% | Featured Online ExclusiveUp to $4k cashback |
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5.99% p.a. | 5.90% p.a. | $2,396 | Principal & Interest | Variable | $0 | $0 | 80% |
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6.14% p.a. | 6.16% p.a. | $2,434 | Principal & Interest | Variable | $0 | $250 | 60% |
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5.95% p.a. | 5.95% p.a. | $2,385 | Principal & Interest | Variable | $0 | $0 | 90% | |||||||||||
5.94% p.a. | 5.95% p.a. | $2,383 | Principal & Interest | Variable | $0 | $0 | 90% |
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