Australia’s rental crisis may continue for several years! — Sydney auction clearance rate reaches 62%

Week’s Key Focus

The rental crisis, initially concentrated in capital cities, has now spread to regional areas, and the situation is worsening. This presents a significant challenge to the federal government, exacerbating the cost of living crisis and impacting a generation of young people. Experts predict that this situation could persist for several years.

Data indicates that in Sydney, the average asking price or weekly rental for apartments has risen by 23.6% to $680 in the past year. The closer to the city center, the higher the rent.

As the government strives to resolve the immigration bottleneck formed during the pandemic, rent prices have surged. The influx of people into Australia, driven by the increase in smaller households formed during the pandemic, has intensified. This, combined with years of inadequate housing supply, has made life increasingly difficult for the one-third of the population who are renters (most on 6-month or 1-year leases).

According to the affordability index by advocacy group National Shelter and urban planning agency SGS Economics and Planning, only average-income families in Melbourne and the Australian Capital Territory can afford rents, with vacancy rates near historical lows. Affordability is declining in all regions except Tasmania.

Emma Greenhalgh, CEO of National Shelter, states that rental affordability in Australia is deteriorating. Over the past year, the steep rise in rents has far outpaced income growth, crushing tenants. With vacancy rates incredibly low, landlords have been able to pass on interest rate increases to tenants, and the pressure is only set to intensify following last week’s rate hike.

The rental crisis also undermines the Reserve Bank of Australia’s efforts to curb inflation. Service inflation, mainly driven by domestic factors such as rent, rose by 5.8% year-on-year. Market services inflation, excluding volatile items, has risen 6.2% this year.

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Auction Results Last Week

Sydney: Of the 914 properties up for auction, 582 reported auction results, with 361 being sold. The clearance rate stood at 62%, with a total auction value of AU$433,558,164 and a median house price of AU$1,492,000.
Melbourne: Out of 1019 properties involved in auctions, 739 reported auction results, with 415 sold. The clearance rate was 56%, totaling an auction value of AU$309,165,008, and the median house price was AU$983,000.