The reality of Australia’s rental crisis has been laid bare, with new figures showing more people choosing to live in shared flats or with relatives as rents continue to soar.
The latest Commonwealth Bank Australia (CBA) economic report shows that rents are rising at their fastest rate in over a decade as demand for housing exceeds supply.
As a result, household behaviour has changed: many people are “saving” and opting for shared accommodation rather than living alone or in a partnership.
The current proportion of people living in shared accommodation is around five percent of the Australian population over 15 years of age, according to the report.
This represents an increase of one percent or around 200,000 people compared to the 2020-2021 period.
Economist Stephen Wu said the number of people living with other relatives, such as siblings, cousins and grandparents, has also increased.
“With the continued slowdown in population growth, changes in household formation are increasing average household size and beginning to dampen housing demand while supply growth remains constrained,” Wu said.
“The advertised rents are further evidence that rent inflation may slow down (albeit gradually) from now on.”
In addition to the significant changes in household composition, rent growth is increasing by nine percent on an annual basis – the strongest growth since 2008.
According to Wu, this is due to record low or near-record low vacancy rates for rental apartments in all capital cities.
“Demand for housing exceeds supply,” he said.
“Since supply cannot react quickly, adjustments must be made on the demand side and therefore also in prices.”
However, in Sydney and Melbourne, the country’s two largest rental markets, growth in asking rents has slowed.
Mr Wu said rental inflation is expected to slow from its elevated growth rate, but it will be a “gradual” trend.
The report follows central bank governor Michele Bullock’s warning that the RBA would not hesitate to raise interest rates to avoid exposing struggling families to persistently high inflation.
At the beginning of this week, interest rates were left at 4.35 percent.
Ms Bullock warned that this could be short-lived if the gap between aggregate demand and aggregate supply is not closed.
“On balance, the Board decided to leave interest rates unchanged because it believes such an outcome would still meet its mandate to align its inflation and employment objectives,” she said.
“I know people don’t want to hear this, but the alternative of persistently high inflation is worse. It hurts everyone.”
