The cost of living.....with a roof over your head!

The housing and rental crises have been spoken and written about with increasing frequency lately.

The question is, will rents ease and make housing more affordable for those who rely on this source of accommodation or will they continue to rise?

Rents soared after Australia reopened its borders post-COVID as demand returned, particularly in the major cities. However, monthly rent growth has eased over the past four months and this trend is expected to continue for a few reasons.

1. Rents move with interest rates.

It is widely expected that the cash rate is expected to fall in 2024. A reduction in interest rates could increase demand from housing investors, leading to increased rental supply and lower rent growth. Early signs that confidence is returning to the investor market are the rise in new investment loans secured since the start of the year.

2. Softer income growth could lead to a change in housing preferences

Household income rose through the pandemic and, with immigration all but coming to halt and visa holders returning to their homes, there was more choice for renters. Occupants of share-houses could afford to move to larger premises and spread across more properties, thus lowering stock levels. However, the current monetary policy – designed to combat inflation - is not only reducing demand in the economy but also countering income growth which may influence renters’ choice of housing.

3. Rental affordability

Renters tend to be on lower incomes, which means there could be a ceiling on how high rents can go before tenants adjust their housing preferences. This can lead to more renters opting for share-housing or moving to more affordable areas which could ease demand in the more expensive rental markets, bringing down growth in rents.

Is this all good news for renters?

Sadly probably not, based on these factors alone. On the plus side for the rental community:

• National cabinet has recently proposed an extra 1.2 million well-located homes to be built in the next five years and this will hopefully help rebalance the supply side.

• Raising standards around the quality of rentals is also a positive step for improving the nature of the tenure.

• The provision of more social and affordable housing can also help to protect lower income households from the extreme fluctuations in rental values seen in the past few years.

The issue is being acknowledged and discussed - but is enough being done?