Given the upsurge in demand relative to supply, advertised rental prices have increased across Australia. Current projections suggest that rental costs will continue to escalate at rates outstripping income growth in 2024, albeit the anticipated rate of growth may be more moderate than in previous years, owing to limitations imposed by affordability and a trend towards shared living arrangements.
Graham Cooke, the head of consumer research at Finder, shared with News.com.au alarming data that indicates a stark divergence in the financial impacts felt by renters in comparison to homeowners. Finder's Consumer Sentiment Tracker reveals that financial constraints afflict 42% of rental households, a contrast to the 37% of homeowners grappling with mortgage payments.
The narrative around financial pressure oftentimes centers around those with mortgages, overlooking the significant strain on renters, who tend to feel the repercussions more acutely when rents increase. The potential for additional rent hikes looms as concerning news for renters already in financial difficulty.
Concordant findings from the Reserve Bank of Australia's Financial Stability Review underscore that financial hardship is both more probable and prevalent among renting households than among those with mortgages—a plausible consequence considering that renters typically earn less and accumulate fewer savings.
Divergent trajectories in financial wellbeing between homeowners and renters were further evidenced by Roy Morgan's 2023 Wealth Report, which highlighted a 7.0% uplift in Australia's wealth between March 2020 and March 2023. This wealth expansion was principally led by a 43.2% surge in the value of owner-occupied homes—that portion of the nation's net wealth predominantly contained within the homeowner demographic.
In stark contrast, the bottom half of the wealth spectrum, where renters largely reside, saw its share of national wealth inch up only from 3.6% to 4.6%. The stark disparities in wealth accumulation mean that renters—who generally earn less—are more vulnerable to rising housing costs, unlike homeowners who are affected to a lesser degree by increases in mortgage repayments.
Owner-occupiers have the added advantage of reaping substantial capital gains should they move to sell their properties, an avenue not available to renting individuals. In anticipation of future adjustments in central bank policy, homeowners may also see some relief if interest rates decline. Renters, however, aminly experience little to no relief as rental prices seldom drop, compounding the long-term financial challenges they face.
