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“Between 2010 and 2018, vacancy rates were below 2 per cent (in Sydney),” he said. “By 2018, vacancy rates were slowly rising and not tightening consistently. Rents did rise, but they didn’t rise as fast as they have in 2021.”
Mr Christopher said the speed and depth of the decline in vacancy rates created the conditions for the current rental crisis.
Tenants Union of NSW chief executive Leo Patterson Ross said a vacancy rate of three per cent was generally considered healthy because the Reserve Bank had decided to allow rents to rise in line with the Consumer Price Index.
He said even if the vacancy rate returned to 3%, it would not alleviate tenants’ already unaffordable rent burdens.
“We should be aiming for historically affordable rents, not trying to make things worse when they’re already bad,” Patterson Ross said. “That means getting to a state of equilibrium and keeping it there for the long term.”
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He said a vacancy rate of 2 to 3 per cent meant the rental market would deteriorate.
“We need to get house price growth rates to 4 to 5 per cent and keep them there for a few years to make housing more affordable.”
Patterson Ross said it was rare for the rental market to enter a tenants’ market, like what was seen in major cities during lockdown.
“Our interest rates are just over 3 percent, and we already have a landlord market in our system,” he said. “Tenants are always competing for landlords, which is really odd in a market system.”
The Australia Institute senior economist Matt Grudnoff said the recent rental crisis was not simply due to economic factors. But he agreed that a return to a vacancy rate of between 2 and 3 per cent would limit rapid rent increases.
The national vacancy rate has never been above 3 per cent since SQM began keeping records. Credit: Dionne Georgopoulos
“I don’t think (vacancy rates) are necessarily the only thing that’s driving rent increases,” Grudnov said.
“People think economics and the economy is mechanical, but it’s more psychological,” he said. “In the last (few) years, the government has allowed price increases, whereas before it didn’t for a long time.”
Maiy Azize, a spokeswoman for Home for All, said the government needed to take action to prevent sharp rent increases in the future and that increasing housing supply was unlikely to have the desired effect.
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“Building homes without allocating them or ensuring they are available for rent doesn’t work,” she said. “That’s because the allocation of homes in Australia is so unfair. There have never been more homes per capita in Australia.”
Aziz advocates for rent caps and public housing to ease the rental crisis and prevent it from happening again, while Real Estate Institute of Australia president Leanne Pilkington wants more housing to be built.
“The problem is we need more supply, we need more investors. While the government has acknowledged these things … none of the solutions they’ve proposed will meet that requirement.
“We can’t meet (housing targets) because we need to bring in craftsmen to build it, and we’re not doing that.”
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