Homeowners, Renters Struggling With Housing Stress: Research

A young family at their home in the Eastern Suburbs in Sydney, Australia, on April 20, 2020. (Lisa Maree Williams/Getty Images)

A significant percentage of Australians are experiencing housing stress amid a sharp growth in rents and interest rates, according to new research.

The national housing campaign Everybody’s Home, launched by a coalition of housing, homelessness, and welfare organisations, has released a report (pdf) revealing the impact of the housing crisis on the community.

The report, which surveyed 749 people between June 1 and 30, found that two-thirds of the respondents experienced housing stress.

Renters were specifically more vulnerable to housing stress, as 82 percent reported having the problem. Housing stress is defined as a low-income household spending over 30 percent of its earnings on housing.

Figures from real estate data provider CoreLogic showed that the average annual rental growth has soared from 1.44 percent in March 2020–before the COVID-19 pandemic, to 9.67 percent in June 2023.

The national median rent stood at $589 (US$396) per week as of June 30, up 9.7 percent compared to the previous 12 months.

Meanwhile, mortgage holders have been hit with 12 interest rate hikes since May 2022, as the Reserve Bank lifted the official cash rate from the historic low of 0.1 percent to the current 4.1 percent.

Mental Health Issues on the Rise

The report also found that rising rents and mortgages were having a negative impact on the mental health of those surveyed.

Around four in five respondents (81 percent) said they felt uncertain about the future, 75 percent were worried about financial security, and 66 percent were concerned about mental health and well-being.

“I am a 55-year-old single mother of a pre-teen child. I work two jobs to pay the mortgage I have now after [my] divorce. My interest rates are about to increase, and I am preparing to sell my house. It is terrifying,” a respondent said in the survey.

Some renters also feared they would be unable to rent if prices kept increasing.

“I am five years from retirement without my own home … If I lose my job or have to reduce hours or need to finish work due to my caring responsibilities, I will be in dire straits financially and will not be able to afford my current accommodation,” another respondent said.

A property is seen for sale in Sydney, Australia, Sept. 1, 2021. (AAP Image/Dan Himbrechts)

Everybody’s Home spokesperson Maiy Azize said the report revealed the bleak reality some Australians face during the housing crisis.

“People are forced to abandon their dreams of providing security and stability for themselves and their loved ones, to rent and even share house well into their retirement years, and to live with a constant fear of price hikes or eviction,” she said.

“Renters now face a housing market that has never been less affordable or more volatile as they are forced to spend record amounts to keep a roof over their heads.”

Firm Says Interest Rates Are Not the Sole Driver of Rent Hikes

While the sharp rises in rents in the past few years coincided with upward movements in interest rates, CoreLogic said the latter was not the only factor contributing to soaring prices.

The data firm pointed out that close to half (47.1 percent) of Australian property investors were negatively geared in the 2020-2021 financial year, which indicated that rents were not covering interest payments on many investments even before interest rates started to increase.

“Irrespective of mortgage costs, rents can generally only rise substantially if the rental market is competitive, and tenants cannot find alternative accommodation to bargain with,” CoreLogic head of Australian residential research Eliza Owen said.

“In other words, rents rise when demand for rental accommodation is outweighing supply.”

CoreLogic noted that a drop in rental properties caused by several factors, including investor uncertainty, less share housing, and higher income growth, had resulted in a significant gap between supply and demand.

However, the firm forecasted that rent growth would slow down in 2024 as more renters may turn to re-forming share-houses, causing demand to fall.

The slowdown would also be accelerated by an easing in construction costs, a return of investors, and a lift in rental supply from government initiatives.