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Rent prices to soar as undersupply sets in

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Rent prices to soar as undersupply sets in

by Cameron Micallef 27 July 2020 1 minute read

The COVID-19 pandemic is the only thing slowing down soaring rental prices, as undersupply of rental properties sweeps the country, an industry expert has revealed.

Rent prices to soar as undersupply sets in
July 27, 2020

Research conducted by Propertyology’s head of research, Simon Pressley, has shown that only four out of 52 major Australian cities and towns had a residential vacancy rate of 3 per cent or higher as at the end of June 2020.

Generally speaking, a market with a balanced supply has a vacancy rate between 2 and 3 per cent. Higher than 3 per cent means the scales are tipped in the tenant’s favour, typically causing a reduction in median rent prices.

“The only thing currently preventing an official declaration of an Australian rental crisis is the sedation effect of the coronavirus containment measures,” Mr Pressley said. 

“Mark my words, sharp rent price rises are inevitable!” 

According to his research, 39 out of 52 Australian towns – 75 per cent of the country – have an undersupply of properties, while nine locations have a balanced market and just four are oversupplied.

Mr Pressley highlighted that the undersupply is not just regionally focused, with five out of the eight capital cities being undersupplied.

However, Australia’s two largest cities remain oversupplied, with Sydney and Melbourne both having above 3 per cent vacant properties.

The Gold Coast (4 per cent) and Geelong (3.5 per cent) are the other two areas which are oversupplied.

What is causing this shortage?

A lack of supply and mum-and-dad property investors buying their property of choice is set to be the cause of rising rents, according to Mr Pressley. 

“Large parts of Australia have seen several consecutive years of low volumes of properties purchased by investors. As local demand continues to rise, the pressure continues to push rents (and yields) higher.”

“Literally this week, the principle of a property management business told our buyer’s agents that they only have nine vacancies among a rent roll of 1,700. This situation is not unusual for most of Australia,” said Mr Pressley.

Rent prices to soar as undersupply sets in
Rent prices to soar as undersupply sets in
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About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your... Read more

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