Australia's Rental Crisis Pushes Renters Towards Homeownership

Renters in major Australian cities would find it financially advantageous to buy the apartments or units they currently occupy, according to recent analysis by PropTrack. A significant surge in rental rates, rather than a fall in buying costs, is causing this shift, suggesting that one-third of properties are now cheaper to buy than to rent.

Unfolding the Rental Crisis

The ongoing rental affordability crisis is being intensified by factors such as increased migration, pandemic recovery trends, and a slowdown in new construction due to rising interest rates. These factors are particularly impacting the lower end of the market, dominated by students, young people, and lower-income households. The median house price to median income ratio has nearly doubled since 2001, and the time to save for a deposit has stretched to 14 years, making it a daunting period for first home buyers.

Shifting Trends Towards Ownership

Burdened by high rents, many, especially first-time buyers, are gravitating towards purchasing properties despite the challenges of accumulating a sufficient deposit. Some are relocating to cities with more favorable buying conditions or to regional areas. Currently, it's cheaper to rent houses in most major cities, but the high costs of housing are presenting significant financial challenges to Australians in 2023.

Experts' Take on The Situation

Professor Nicole Gurran, a housing analyst from the University of Sydney, emphasizes the need for new constructions to integrate social and affordable housing to address the unaffordable rents and barriers to homeownership for a generation of renters. PropTrack economist Paul Ryan suggests that the balance favoring buying over renting may not shift until possibly 2024, if interest rates drop as forecasted, potentially propelling property prices up again.