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“Ninety per cent of visas in the country are temporary, so demand for housing translates directly into demand for rentals,” he said.
Paulson added that higher mortgage rates had significantly reduced borrowing capacity for first-time buyers, while house prices had not fallen, “thereby prolonging the period in which some middle- and upper-income earners remain in the rental market”.
Add to that the housing shortage, which existed before the pandemic but has been exacerbated during the outbreak by a range of factors, including rapidly rising construction costs and labor and material capacity constraints.
“There’s always a gap between immigrant demand for housing and housing supply,” Mussina said. “The housing supply can’t respond quickly enough.”
Today, median rents are at an all-time high, with the average tenant paying more than 30% of their income in rent, a high level that forces low-income households to Rental pressure.
Competition for limited supply drives up prices.Credit: Peter Ray
CoreLogic data shows Sydney has seen the biggest increase, rising from 26.6 per cent at the start of the pandemic to 32.7 per cent in the June 2024 quarter.
But there is good news: the situation of tenants is expected to be alleviated to some extent.
“The Albanese administration, to its credit, has committed to two one-time increases in federal rental assistance, the second of which will take effect soon. This will provide some limited relief to a small number of eligible low-income renters,” Paulson said.
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More broadly, Mussina predicts population growth levels will fall by 2024 as the government works to reduce the number of overseas students.
Additionally, Lawless said a number of factors would help normalise rental growth rates.
“First, affordability constraints mean renters don’t have a lot of flexibility in how they pay,” he said. “Renters typically spend around 30 per cent of their income on housing costs, so it’s hard for them to afford more.”
He said there was likely to be further changes in family structures, with more multi-generational and shared households, which would help spread the burden of rental costs.
There will also be a supply response – but it’s not there yet.
“Hopefully, a year from now, we’ll see some easing of capacity constraints and see more supply,” Lawless said. “This will help in two ways: first, many people waiting for their homes to be completed will stay in the rental market longer, and second, the additional supply will hopefully increase rental supply.”
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