The South Australian rental market has been highly active in recent months, witnessing a surge in applications per property compared to previous times. This increase can be attributed partly to the ease of submitting applications electronically, which contrasts with the cumbersome paper-based methods of the past. However, the primary driver is the scarcity of long-term rental properties.
This shortage has led to a significant rise in average weekly rents across Adelaide, soaring from $388 per week in February 2021 to $576 in February 2024, marking a 48% increase according to sqmresearch.com.au. This surge in rental costs far outpaces Australia’s wage growth, which stood at only 10.5% during the same period according to ABS data. Consequently, there are notable affordability challenges arising.
The consequence of escalating rents against relatively stagnant wages is evident in the growing number of tenants falling into rental arrears. The percentage of tenants behind in rent by seven days or more increased from 0.89% in February 2021 to 2.3% in January 2024. While seasonal factors like the holiday season may contribute to this, the majority of the rise is due to the broader market dynamics. In such a climate, having insurance coverage becomes crucial to mitigate risks associated with tenants’ changing circumstances. Feel free to contact your property manager for information on specialised landlord insurance products frequently utilized by our clients.
Currently, application levels are remarkably high, particularly for properties priced below $450. However, even within this price range, only about 15% of applications align with affordability guidelines. The leasing sector is facing a notable challenge of attracting quality applicants, especially in higher rent brackets. This trend is also fuelling an uptick in fraudulent applications and documentation being submitted. While maximizing property income is vital, sometimes adjusting the rental price slightly downward could attract better-quality applicants and reduce vacancy periods, potentially resulting in better financial outcomes.
Another issue in the current market landscape is assessing applicants’ affordability accurately. While historically, the guideline of 30% of net income was used for assessment, it’s becoming clearer that this guideline may need flexibility to fill vacancies effectively. In such cases, we prioritise providing you with comprehensive information to make informed decisions.
As rental prices continue to climb, shared housing arrangements are becoming more prevalent. This includes scenarios like grandparents residing with family units, multiple families sharing one dwelling, or young professionals pooling resources to lease a property. While such arrangements might have been less favoured previously due to wear and tear concerns, they are becoming increasingly necessary in the face of rising rents.
Despite these challenges, Adelaide remains an attractive investment destination with a robust market. Every market has its hurdles, and we are here to assist you with any questions regarding the market trends or strategies for marketing your rental property. Feel free to reach out to your property manager for further guidance.
