Australia is currently facing a severe housing crisis, with record low rental vacancy rates and skyrocketing rents. According to AMP chief economist, Shane Oliver, the low vacancy rates have driven rents into the stratosphere. Oliver attributes this housing crisis to decades of high immigration levels.
Oliver points out that immigration levels in Australia significantly increased from 120,000 per annum in the post-1990s recession to around 250,000 to 260,000 per annum. This led to an additional population of approximately 150,000 people. However, the construction of new dwellings did not rise significantly until the apartment building boom from 2015 to 2018. As a result, the housing market faced a cumulative undersupply issue, leading to expensive house prices and a housing affordability problem.
Alex Joiner, chief economist at IFM Investors, concurs with Oliver’s assessment and highlights the stark divergence between population growth and dwelling commencements. Joiner describes the situation as a “pretty sobering picture for housing.”
To make matters worse, REA Group Senior Economist, Eleanor Creagh, warns that there is no end in sight for the rental crisis in Australia. The national rental vacancy rate hit a fresh low of 1.1% in August, leading to tight rental markets and strong rental price rises. Creagh emphasizes that strong migration numbers have put significant pressure on the rental market, as recent arrivals to Australia are more likely to rent.
As a result, the rental market has become increasingly competitive, with properties leasing out quickly and renters being forced to pay more than the advertised rental price to secure a property. This has put millions of Australians under intense financial pressure and has led to overcrowding or homelessness.
It is clear that the high levels of immigration encouraged by the Albanese Government have contributed to the housing crisis in Australia. The influx of population has created a shortage of available rentals and driven up rental prices. The government must reevaluate immigration levels and take action to increase rental supply to alleviate the pressure cooker situation in the rental market.
Sources:
– Shane Oliver, AMP chief economist
– Alex Joiner, chief economist at IFM Investors
– Eleanor Creagh, REA Group Senior Economist
– AFR Property forum