Property managers around Australia are reporting much busier open for inspections and a rise in desperate tenants offering sweeteners, as housing demand remains high and stock levels shrink.
In most parts of the country, would-be tenants are facing highly competitive conditions, with the national vacancy rate now just 0.9%, according to the latest SQM Research data.
Tenant demand is up year-on-year by 13%, and while the number of tenants looking for a house has fallen by 9.6% year-on-year, demand for units has surged by a whopping 36.9%.
“Rental markets around the country are quite tight at the moment,” PropTrack economist Angus Moore said.
Mr Moore said part of the undersupply problem was sparked by an exodus of investors from the property market in recent years.
For many investors, that was an attractive choice – prices have risen a lot, meaning many were sitting on significant equity gains, he said.
“And while markets are tight and rents are growing quickly now, that wasn’t the case in 2020 and 2021 in many places, particularly in inner-city Sydney and Melbourne where rents actually fell through 2020.”
Investors are beginning to make a slow comeback, but she said activity is not fast enough to keep up with surging tenant demand.
“Investors now account for around a third of all new housing lending, after being as little as a quarter in 2020,” Mr Moore said.
“Those new investors will start to bring more rentals to the market and help ease tightness, but that will take some time. The number of new investors relative to the size of the rental market is small.”
Property managers in Melbourne, Sydney, and Brisbane have given insight into what they’re seeing within their suburbs – and it’s bleak.
Melbourne’s rental market
Sophie McGuinness is the business development manager at Jellis Craig Stonnington and said the rental market in her area is the busiest it’s been in years.
“We have seen a huge increase in demand this year for larger, quality family homes but a very low demand in the apartment space,” Ms McGuiness said.
“Although, since July, demand for one- and two-bedroom apartments has grown.
“We’re seeing a large number of renters looking to migrate from interstate and overseas, and a big trend we’re seeing is the request for virtual tours and video inspections.”
Melbourne-based agents say the rental market is the busiest it has been in years. Picture: Getty
Ms McGuinness said that over the past fortnight she has seen an increase in the number of attendees through mid-week inspections.
However, she added that she has been seeing a much higher application withdrawal rate.
“Renters are applying for properties before viewing them, I suspect through fear of missing out, but then withdrawing after the inspection due to an array of factors, from taking issue with the size and condition to being able to find a newer property in the area .
“Through 2020-2021, with people living and working from home, the priority for renters was having an outdoor space such as a courtyard or large balcony. Now, it seems that renters aren’t willing to compromise on conditions.”
Sydney’s rental market
Adam Freitas, new business executive at Raine & Horne, manages properties in popular rental suburbs like Newtown, Enmore, Camperdown, Stanmore, Erskineville, Darlington, Chippendale, Alexandria, and Redfern.
Rental properties are being tightly held, which Mr Freitas said is contributing to the lack of stock. He expects rental prices to increase as a result.
“Currently, the vacancy rate in most of our core suburbs is at or less than 1%. This means there is currently far more demand than available stock.
“This lack of stock is only going to add upwards pressure on rental prices. With an increase in migration, including the return of international students who have traditionally called this area home, and a lack of new investment properties coming into the market, prices will continue to increase.”
Mr Freitas is currently holding between 30 to 40 open for inspections per week, which is far less than during the pandemic. He said tenants at these open for inspections are worried about the worsening state of the market.
“Many tenants are concerned with two things at the moment – one, that the lack of stock is creating an ultra-competitive market, making it extremely difficult to secure a property, and two, the consequence of low stock levels is not only frustration and extended search periods, but also rising rent prices.”
Sydney agents say tenants are offering sweeteners with their applications in order to secure a home. Image: Getty Images
To Mr Freitas’ surprise, tenants have been offering rent far beyond the asking price in order to secure a home.
“I listed a property for rent late last week in Chippendale. We opened it on Saturday for the first time and more than 40 groups attended. Come Monday, we had received more than 20 applications for the property. The tenants who secured the property offered a considerable amount above the asking price.
“Similarly, I leased a two-bedroom apartment in Stanmore after its first open house on Saturday to a tenant who not only made a significantly increased offer on the asking price, but who also paid six months’ rent in advance to secure the property.”
Some tenants are in a position to offer those sweeteners, but many aren’t, leaving countless desperate renters disappointed.
Brisbane’s rental market
Amilee Lo is the business development manager at Place Sunnybank and manages properties in Sunnybank, Sunnybank Hills, Calamvale, Algester, and Parkinson.
The market in Brisbane’s southern region is starting to slow as fewer rentals are being put on the market, Ms Lo said.
“There’s not as much stock as before and the owner’s expectation of rent is getting higher, however, there are fewer quality tenants out there.”
Brisbane’s rental market is seeing tenants being priced out of their homes. Picture: Getty
Ms Lo said that she’s currently holding 10 to 12 open for inspections per week. One of the major reasons for tenants currently moving on is due to rent increases, as landlords make most of the higher demand.
“Most openings are a result of the owner wanting to increase the rent a lot higher than before and the tenants needing to move out due to this,” she said.
“Tenants are concerned that they will not be able to find something else suitable due to this increasingly expensive rental market.”