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Australia’s rental market will only get tighter in 2023. Could more property investors be the answer?

Renting in a capital city in 2023 is set to become harder as increasing demand and insufficient supply continue to drive up prices, experts predict.

Brendan James has felt the consequences of the tightening rental market firsthand.

The 32-year-old musician was told his rent would go up by more than 22 per cent at the end of his lease agreement. 

Come April, Brendan’s two-bedroom unit in Kedron, on Brisbane’s north side, will go from $440 to $540 a week.

He said he was told the increase would bring the property in line with similar apartments in the building.

While he said he could bear the cost of the increase, he is moving out on principal.

“It’s just gouging … I don’t think for a place of this size the interest rate increase really justify as 22 per cent increase in rent,” he said.

“I’m not getting $100 more a week income either.

“Maybe it’s just stubbornness on my on my behalf but I don’t think this place is worth close to $600 a week.”

Instead he will move into a friend’s place on Brisbane’s south side.

It’s not ideal — he’s moving further away from family and into a house instead of a unit, which he prefers. 

But he says “beggars can’t be choosers”.

“What can I actually do in this situation? I don’t have the capital to go and buy — I’ve let that dream go a long time ago — but I’d love to be able to rent and not move back to mum’s place at 32.”

The rental market is tightening in Australia’s capital cities

A new rental report released on Thursday from PropTrack found demand for rentals has intensified in the capital cities, with enquiries per listing up 31.1 per cent.

But while demand grows, the supply of properties becoming available for rent remains historically low.

Combined capital city rental listings are down 26.3 per cent year-on-year to the lowest they’ve been since February 2003.

Sydney and Melbourne have had the biggest decline in the number of properties available for rent, and the biggest increases in enquiries on a per-listing basis. 

 Cameron Kush stands in a park smiling.
Economics researcher Cameron Kush says Queensland continues to see really strong interstate migration.(Supplied)

Economic researcher Cameron Kusher, who wrote the report, said many people had left the Sydney and Melbourne markets during the pandemic.

“Now they’re coming back and also a lot of people that migrate to Australia from overseas are coming into those cities and exacerbating the shortage of supply,” he said.

“But keep in mind rents in Sydney and Melbourne have barely moved from where they were at the start of the pandemic.”

Over the 12 months to December 2022, Brisbane and Adelaide recorded double-digit rental growth, with Brisbane growing 11.4 per cent and Adelaide 11.8 per cent.

“Queensland does see overseas migration settle … largely in south-east Queensland, but nowhere near as many end up in this region as we see ending up in Sydney in Melbourne,” Mr Kusher said.

“We’re still seeing really strong interstate migration into Queensland from other states and territories.

“And we think that might ease off a little bit, but it’s likely to still be very much positive going forward.”

The report’s data gives a slightly different picture for regional Australia, where markets have seen demand for rentals ease and enquiries per listing fall by a third. 

Regionally, total rental listings were 9.8 per cent higher year-on-year, the largest annual increase since June 2014.

But rental prices are increasing no matter where you live.

Rents in capital cities are up 10 per cent year-on-year in December, compared with 7.1 per cent for regional areas.

Are more property investors the solution?

The PropTrack report said the most effective way to alleviate rental pressures in the short-term was to encourage more investment in housing.

Shaun Bond, an economist from the University of Queensland, said corporate investors could play an integral role to alleviating the current pressure in the rental market.

“In Australia we call it the build-to-rent market, where we have large investors who build large apartment buildings that could be rented out,” Professor Bond said.

“That would help bring on large amounts of supply relatively quickly.

“Institutional investors have large amounts of capital that they could deploy in this area, plus they’re going to be more stable in terms of ownership.

“In Australia, the rental markets are heavily dominated by very small investors and as we’ve seen in this current rental crisis, at some point some of those investors would be happy to sell out and then those properties go into home ownership.”

Mr Kusher said planning for more supply could take about five years.

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