The Rental Market in 2023: What to Expect
As anyone who is currently renting will tell you, the Australian market strongly favours landlords.
Put simply, finding affordable rental accommodation is harder than ever.
Indeed, a recent report from PropTrack revealed that less than 20% of rental properties listed on realestate.com.au in September 2022 were available for lower than $400 per week.
In the major cities like Sydney, Darwin, Hobart and Canberra, this figure is more like 10%.
For many people, this is already a tough situation. But where does it leave them as we approach the new year?
In this article, we’ll take a closer look at what the Australian rental market is predicted to be like in 2023 and beyond.
Why are rental prices so high?
First things first. Why are rental prices so high on average throughout Australia?
Well, there are several reasons. Firstly, house prices are at a record high, with the median house value in Melbourne, Sydney and Canberra being over $900,000. So many people have no choice but to rent - which, in turn, creates significant demand.
Secondly, the Covid-19 pandemic had a major impact on the country’s real estate market. Many landlords choose to sell their properties. This has resulted in a lower pool of rental properties being available throughout the country.
Other factors like the rapidly increasing cash rate, the fact that you need a 20% deposit to buy a home and rising levels of migration are all playing a part too.
Subsequently, demand for rental accommodation is far outstripping availability. This only further encourages landlords to increase the amount they want to charge to generate extra revenue.
What needs to be done?
One of the main things that need to be done is that more houses have to be built. This will narrow the gap between supply and demand because as more people build their own homes, they will vacate their current rental property. Thus freeing it up for someone else.
The first home buyer grant initiative and the loan options available from companies like Homestar Finance are providing some impetus for doing this.
However, labour and supply chain issues during and post-pandemic have limited the number of new homes built in the last couple of years. Which has contributed to the high number of people who need to rent.
To further improve the rental crisis, an ambitious plan has been agreed upon by the federal and state governments of Australia to build up to a million new affordable and social homes over five years from 2024.
They aim to do this by releasing brownfield and greenfield land for development, changing planning regulations and by incentivising private investors into property building.
Should this plan come to fruition, this will significantly improve the housing and rental market.
But what about 2023?
With this plan due to be launched in 2024, what does it mean for the rental market in Australia in 2023?
Well, unfortunately, the short answer is that more pain is coming.
For much of 2023, the situation is likely to get worse. A recent report by CoreLogic in November 2022 revealed that rents in most Australian capital cities are increasing by rates of more than 10%.
With international borders increasing, even more, people will be looking for places to rent in Australia. Thus driving demand for low vacancy rates much higher.
In addition, internal migration is set to continue its rise too. With many more affluent people from cities moving to regional or country areas. This is also resulting in higher rental prices.
Such is the demand for rental accommodation, more people than ever are signing up for house inspections. Famously, in the South-west Sydney suburb of Hinchinbrook back in January 2022, police had to be called to control a crowd of 200 potential renters at one house inspection.
Furthermore, throughout Australia, it is not uncommon to have over 30 people turn up for one single viewing.
This has led to people going to extraordinary lengths to secure a rental property, including paying 12 months' rent upfront at a higher rate than the previous tenant. This is something many people just can’t compete with.
So what can you do in 2023?
The ultimate goal should be to own a home. But whilst you are working towards this, the best thing you can do is be an excellent tenant in your current property.
Sometimes a bird in the hand is worth two in the bush. Whilst relief might be on its way by the end of the year, for now, just focus on paying your existing rent on time. Also, be sure to look after the property you are staying in and try to save a bit of money. This way, you will be able to cover any increase in rent that might take effect at the end of your lease period.
If you are currently looking to rent, one of the best things you can do to secure the property is to develop a good rapport with the agent.
You may also consider offering more money than is being asked for. But over a longer-term period than they were suggesting.
Most importantly, you need to be aware of what properties are available.
They will get snapped up quickly, so you will have to be on top of anything available and work fast to make an appointment. Have all your required documentation ready to hand over as required and be sure to fill out your application beforehand, so you can immediately give it to the agent at the property, if it is to your liking.
All of these things will give you an advantage over your competition.