Whilst 2011 has been a bit of a challenging year in the residential property market, recent data released by the Real Estate Institute of Australia shows that the rental market has maintained its buoyancy and affordability in comparison to home purchase.
We spoke to Pam Bennet, Acting President of Real Estate Institute of Australia (REIA) to get the inside view on what is happening in the rental market down under.
Current rental trends
|Capital City||Q2 Vacancy Rate||Annual Change||Median Rent – 3 Bedrooms||Annual Change|
Year on year the vacancy rate in most capital cities of Australia has remained largely unchanged with a few notable exceptions. Ms Bennett said, “Year on year Darwin has seen a significant increase in vacancy rates which have risen to 4.6%. With the median rental for a 3 bedroom home now at $526, the proportion of income required to meet loan repayments is less than required to pay monthly rental fees ( 22.8% vs. 25.4%), making renting a less desirable option.”
Ms Bennett added, “Hobart is also another city to watch. As the vacancy rate edges towards 3% and median rents have experienced significant growth (9.1%), consumers may turn to buy as a more affordable option.”
Ms Bennett also stated “Rental vacancy rates in Brisbane have significantly tightened year on year, which we believe is a direct result of natural disasters causing an influx of short term demand for rental properties as home owners relocate whilst home renovation occurs.”
Rental Affordability vs. Home Ownership
Statistics from the REIA show that whilst renting is a more affordable option than buying, rental affordability has declined at a faster rate in the past 5 years than affordability of buying a home.
According to Ms Bennett, “Based on the data between June 2001 and 2006, rental affordability didn’t change at all, while the proportion of income required to make home loan repayments increased 8.1% over the same period. However over the past 5 years, the proportion of income required to meet rent payments has grown by 3%, whilst the proportion to meet home loan repayments has only grown 1.4%.”
|June 2011||June 2006||June 2001|
|Proportion of income required to meet rent payments||24.8%||21.8%||21.8%|
|Proportion of income required to meet home loan repayments||34.6%||33.2%||25.1%|
Data above is a comparison of the proportion of income required to meet home loan and rent payments.
Whilst renters are looking for some relief, according to the REIA the next 12 months will remain challenging in the rental market. Ms Bennett concluded by saying, “As the residential purchasing market becomes less affordable, more people choose renting a home as a more affordable option. As demand for rental properties increases over the next twelve months, rental prices are more likely to increase and vacancy rates will tighten.”