‘Vicious spiral’ drags Australia housing rental market into deepening crisis

SYDNEY – It is getting harder than ever to rent a home in Australia as one of the world’s most acute real estate shortages worsens by the day.

Less than 1 per cent of the country’s rental properties are now available for occupancy, far fewer than even red hot markets like Singapore.

That is sending rents soaring to eye-watering levels, deepening an already dire cost of living crunch and pushing thousands more Australians into homelessness.

The crisis is only set to intensify. Building pipelines are near the lowest on record and construction firms caught out by surging costs are folding by the week.

At the same time, increasingly assertive “not in my backyard” movements are halting new homes, just as a post-pandemic rebound in immigration means more than a million net arrivals over the next five years need somewhere to live.

While the authorities are proposing limited measures, they will take years to bear fruit.

Those and other solutions offered by economists and lawmakers all point to one common conclusion: Australia needs hundreds of thousands of new homes.

“Demand has never really been hotter, and people supplying property have never been more hesitant. What makes this cycle different is that people don’t want to build homes,” said ANZ senior economist Adelaide Timbrell.

“And that’s putting us in this vicious spiral.”

On the supply side, the outlook is grim. The level of new building approvals is near an all-time low when adjusted for population, according to the Commonwealth Bank of Australia.

Meanwhile, 560 construction firms filed for insolvency in July and August alone, a third of the country’s overall number, regulatory data shows.

The hangover from a pandemic boom is partly to blame, when firms agreed to fixed-price contracts with customers building homes or doing up existing properties.

A subsequent crunch on labour and building materials, combined with crippling inflation, means that houses are now 30 per cent pricier to build than before the pandemic, according to Mr Phil Dwyer, national president of Builders Collective of Australia.

It is also getting harder to convince Australians they need more neighbours.

At the extreme end is a stand-off in Sydney coastal suburb Little Bay, where a 12ha swathe of land has been fenced off for years as the local community fights billionaire developer Harry Triguboff’s plans to build almost 2,000 apartments.

Mr Triguboff, one of Sydney’s biggest apartment developers, has faced similar fights before.

He has called for Sydney to embrace apartment living, like other major cities, and for its wealthy eastern suburbs to open up to development if supply shortfalls are to be eased.

In Sydney, the crisis has seen rents for houses surge 16 per cent in the past year alone, while apartment rents have soared 20 per cent during the same period, according to SQM Research.

For Ms Maryam Yaqoob, the price shock has been even bigger.

The 28-year-old engineer had little choice but to leave her two-bedroom unit in Mascot when her rent leaped 60 per cent to about A$800 (S$704) a week. She downgraded to a one-bedroom unit with no air-conditioning or carpet.

“I had no idea that it would be so hard for us because ours is a double-income household,” said Ms Yaqoob. “Wherever we went, there were long queues – 50 people were lining up to see one unit and the prices were too high.”

The state government of New South Wales, home to Sydney, has called the city’s housing situation a “crisis”.

Local media has been peppered with stories about full-time workers forced to live in tents and caravan parks, or students “hot bedding”.

Sydney is now the second least affordable housing market in the world, only behind Hong Kong, according to Demographia.

To cope with an expected influx of arrivals in the coming years, New South Wales needs to build about 900,000 additional dwellings by 2041, according to government estimates.

Not all residents are anti-development. A group called Yimby – yes in my backyard – formed a branch in Sydney after its founders attended a community meeting where about 50 people opposed the building of a four-storey block next to a light rail station, versus just a few supporters.

“The current planning system, it’s kind of geared towards making it easy for – and I’ll be fairly blunt about it – wealthy English-speaking and usually retired residents who have more time on their hands to have their say via local council,” Yimby spokeswoman Melissa Neighbour said in an interview.

The group advocates more density to improve housing affordability and is campaigning for more “upzoning” or higher-density development, particularly around transport.

While supply and affordability have become political hot-button issues, with state and federal governments proposing measures to alleviate the situation, any real results are not likely any time soon.

The New South Wales Labor government, elected in 2023, has given some developers the green light to build taller, denser projects and access to a speedier planning approval process, if they include a proportion of affordable housing.

“There is no silver bullet when it comes to addressing our housing crisis,” said the state’s Minister for Housing Rose Jackson in an e-mail reply to questions.

“Providing more supply in places people want to live and work, located near the services people need, is crucial.”

At a federal level, the government recently passed its key housing affordability measure through Parliament after months of fighting with opposition parties.

The A$10 billion Housing Australia Future Fund aims to build 30,000 new social and affordable homes over the next five years.

For some, any kind of relief cannot come soon enough.

At the turn of the century, the median dwelling in Greater Sydney sold for around 6½ times a mid-career teacher’s annual salary, according to a New South Wales Productivity Commission report. By 2022, this had surged to 14 times.

Primary school teacher Vianney Mae has struggled to find permanent accommodation for herself and her two sons since she was evicted from her four-bedroom rental home in May 2022, after asking for some electrical repairs.

“I’m a professional, I earn a good wage and I cannot afford to actually even rent a property that would house the three of us. It’s just ridiculous,” she said.

“I’m turning 60 this year, and who would have thought at this age I’d still be struggling to find somewhere to live?” BLOOMBERG