Blaming Australia’s rental crisis on immigrants doesn’t tell the real story

The article below adds the effects of the pandemic lockdowns to immigration as the cause of the rental property shortage.  He overlooks the supply side of the problem.  

There is in fact no shortage of supply.  There are very large numbers of dwellings available for rent in most big Australian cities. The catch is that they are "holiday" rentals administered by the likes of AirBnb.  

What has has happened is that many property owners have moved their properties out of the long-term to the short term market. If all the short-term lets were moved onto the long term market there would be NO rental shortage

Governments fulminate about that and contemplate more regulations to solve the problem but ignore the fact that they are the cause of the problem.  Governments have made life so difficult for landlords that short-term lets are a better deal for them despite the much greater management requirements of short term lets.

So where exactly have governments gone wrong?  They have ratcheted up tenant "protection" to a very intrusive degree.  The universal truth that favouring one group disadvantages another seems unknown to them.  Tenant protection is landlord restriction. Control over their properties is greatly reduced by tenant protection.  And landlords stand to lose significantly from that.

A notable watershed in Queensland was when the State government introduced new pro-tenant laws about a year ago.  Part of those "reforms" was to compel landlords to accept tenants with pets.  Landlords could no longer say "no pets" as a condition to renting out their properties.  That seems kind, humane and reasonable but it imposes large potential costs on landlords.

In my past career as a landlord, I did from time to time have tenants who brought in pets despite not being allowed to.  What was the result?  In one word: stink.  Pets emptying their bladders and bowels on my carpet made it stink in such a way that no cleaning could remove the smell.  The stink made the property unlettable to subsequent tenants. As a result I had on such occasions to throw out all the carpets and spend thousands of dollars replacing them.  That often wiped out every cent that the pet-owning tenants had paid

No wonder property owners went for an escape from that government-created trap! Tenants have to have MUCH LESS "protection" if availability of long term rental accommodation is to increase. What good is a protected tenancy if you cannot get ANY property at all to live in?

As the rental crisis continues to unfold throughout much of the nation, it has left many of us wondering how this could have occurred in a nation as cumulatively wealthy as Australia. By going through some of the data from the ABS, RBA and various private providers that’s what we’ll attempt to determine today and provide a bit of insight on how things may transpire from here.

When the pandemic arrived on our shores in early 2020, the size of the average Australian household rose from 2.51 people per home to 2.55 people. While this may not sound like a lot, it in essence reduced the number of households nationally by 162,000 based on the average household size nationally, playing a significant role in falling rental demand during the early months of the pandemic.

But as lockdowns dragged on and close quarters began to take their toll, more and more Australians wanted a place of their own. Between Q3 2020 and Q2 2022, the average household size fell from 2.55 persons to 2.48. This saw demand for homes rise by 288,000, more than cancelling out the reduction in demand seen in the early months of the pandemic.

Capital city rents took a similar path. As demand faded between March and September 2020, capital city asking rents fell by 5.4 per cent according to data from SQM Research. Once demand began to pick up significantly, rents rose by 8.5 per cent during 2021, all while the nation’s borders remained largely closed.

The migration factor

Over the past three years migration has been something of a double-edged sword for capital city rental markets. Between March 2020 and December 2021, the number of temporary visa holders in categories likely to require some form of housing fell by 328,000. Based on the average Australian household size demand for homes fell by 131,000.

During 2021 when rents began take off, the number of temporary visa holders in categories likely to require housing fell by 147,000. This helped to put significant downward pressure on rents at a time when demand from existing households was skyrocketing and more Australians than ever were looking to get their own place.

But once this headwind putting downward pressure on rents was removed when the nation’s borders reopened in early 2022, capital city rents began to surge in short order. During 2021 quarterly rental price growth sat between 1.5 and 2.5 per cent. In the first quarter of 2022 capital city rents surged by 5.5 per cent, the largest increase in the history of SQM’s data series at the time.

Between the start of 2022 and the most recent data from the Department of Home Affairs, which covers up until the end of February, the number of temporary visa holders in categories likely to require housing rose by 444,000.

With a little over 2.03 million people currently in these categories, more temporary visa holders than ever require some form of housing, a figure 116,000 higher than this time in 2020.

Looking ahead

Despite surging numbers of temporary visa holders and a budget forecasting a record high level of permanent non-humanitarian migration, the origin of the rental crisis was not immigration, but instead the swift changes brought about by the pandemic in the way we live and work.

However, since the border reopened in early 2022 the normalisation of temporary visa holder numbers has exacerbated the rental crisis significantly.

It ultimately comes down to numbers, there are 444,000 more people in need of homes in this category than at the start of 2022. This has left many Australians asking an important and profound question, where are all Australia’s renters both citizens and visa holders going to live?

In recent months of data which covers up until the end of February, the shift has become more pronounced, with 198,000 temporary visa holders likely to require some form of housing arriving in the country in the past two months.

To say that it was a challenging set of circumstances would be understatement. According to forecasts from the RBA, the situation may not significantly improve any time soon. In a recent speech RBA Governor Philip Lowe shared the bank’s prediction that Australia’s population would continue to grow faster than the nation’s dwelling stock until at least 2025.

While there are signs that sharehousing is on the rise and more people are moving in with family and friends, overcoming the ongoing increase in demand in capital city areas most heavily impacted by domestic and international migration may take quite some time.

Ultimately, it is the federal government’s decision to grow the population faster than the RBA forecasts that housing can be built, not that of individual migrant households.

As the rental crisis becomes increasingly challenging for many Australians, one hopes that this is kept in mind as frustration continues to build amid the nation’s worst rental crisis in living memory.

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