Is it possible to find cheap rental properties?

Cheap rentals are increasingly becoming a rarity, with the share of properties listed online for a weekly rent below $400 hitting a record low post pandemic, a new report shows.

According to real estate data analysis firm PropTrack, demand for rentals is increasing amid rising interest rates, resulting in fewer homebuyers entering the market and as investors shed excess stock.

A market insight report released by PropTrack in October, shows rentals listed on the realestate.com.au website for under $400 per week dropped to a national low of 19.3% in September.

The share of low-priced rentals is now significantly lower than at the start of the COVID-19 pandemic (March 2020), when the share of rentals listed for the same range was 41.8%, the REA Group-owned company said.

Read more: Rent prices nearing peak – SQM  

Across Australia’s capital cities, 16.4% of listings were for under $400 weekly, having fallen from 36.1% two-and-a-half years’ ago.

Those wanting cheap rent have slightly more options in regional areas, where the share of rentals listed below $400 per week was 28.2%, down from over half (57%) in March 2020.

PropTrack director economic research Cameron Kusher (pictured above) told MPA the lack of rental stock is driven by high demand.

A reduction in first-home buyer purchasing, and an increase in the number of people looking for rentals as immigration returns, is driving demand, he said.  The issue is exacerbated by increased competition for short-term rental options and investors offloading rental stock throughout the pandemic.

“Investor sales have likely risen, in part, due to the increase in the cost of holding investment properties due to higher mortgage interest rates, caps on investor and interest-only credit growth previously in place and increases to land tax for investors by state governments,” Kusher said.

Read next: When will house prices find their floor?

Kusher said the record low availability of rental supply is pushing up prices for renters.  The number of rental properties listed on the realestate.com.au website, and the number of days it takes for a property to be leased, are both at record lows, he said.

“Essentially, demand for rental properties is at very high levels – record highs in most capital cities – while the supply of stock for rent is extremely low,” Kusher said.

“These conditions afford landlords the opportunity to lift rents and with mortgage rates rising rapidly, there is a strong incentive for landlords to do so where they can.”

Across all capital cities, the share of listings below the $400 mark made up a quarter or less of total listings, PropTrack data showed.

A year ago in Sydney, one in five rentals were advertised below $400 per week, slipping to one in 10 in September.  In ACT, Hobart and Darwin, less than 10% of listings in each city were under the $400 weekly threshold.

Over the last year, Melbourne, Adelaide and Brisbane had the biggest drop in the share of listings available to rent for under $400 weekly, down 20.4 percentage points, 19 percentage points and 16.6 percentage points respectively.

According to the September report, the ACT region had the lowest percentage of rental listings under $400 per week (1%), followed by Darwin (2.1%), Sydney (5.9%), Hobart (6%), Perth (8.1%), Brisbane (10.1%), Adelaide (15.4%), and Melbourne (16.7%).