how much worse can the rental supply crisis get?

With vacancy rates at all time lows, news that further restrictions to available rental supply in Victoria should come as a warning to those trying to secure a rental in this market. An alarming statistic was released from the Residential Tenancies Bond Authority this month which confirmed they were holding 15,600 fewer bonds now than they were at this same time last year. A bond is paid at the commencement of a tenancy and held by the RTBA for the duration of a tenancy. For there to be such a significant drop in the total number of bonds in this state is a really clear indicator that a substantial number of investment properties have come off the market to either be sold or moved into by the respective property owners.

When you pair this information with a significant drop in the upcoming pipeline of new builds in Victoria, many of which in regional Victoria are built as investment properties, this spells disaster for rental supply in the forthcoming 12-24 months. So if you are a renter, if you thought obtaining a rental property was hard now, faced with this information its clear things will only get harder. For investment property owners who have done in hard over the last 12-18 months with significant holding cost increases through interest rate rises, insurance premiums increasing and land tax increasing by over 50% in many cases, there is a very small silver lining. Which is with ongoing high demand for rentals, and the likely ongoing decrease in available stock, rental providers might be able to look at increasing rents slightly to help mitigate the significant increases to their holding costs.

Rental Providers can often be seen as the bad guy in this scenario, but more often than not in our case in regional Vic at least, they are mum and dad investors who are trying to get ahead in life. It needs to be understood that with their mortgage repayments almost doubling over the last 18 months and the other significant increases to holding costs, many are barely able to get by. This hardship is the likely cause of so many property owners getting out of the investment property market which has lead to that startling figure from the RTBA. This may be the intention of the government to try and transition some investment properties to be taken on by first home owners instead. What that doesn’t help with though is fixing the rental supply crisis in the state, as many people who rent aren’t in a position to buy a home, so this decrease in stock will just spell disaster for renters in the long run.