Data from REA Group-owned flatmates listing service indicates that the demand for shared living homes has returned to its pre-pandemic level, with vacancy rates at a record low. Data suggests that in some significant suburbs, sharing a place with a flatmate is not a financially viable substitute for living alone. There are worries that rental prices will continue to climb in the coming year.
Here’s a breakdown of the full article originally published by ABC News recently.
Photo: Unsplash
High cost of rent across Australia
In early 2020, when the pandemic struck, a two-bedroom apartment was inhabited by a young couple in their twenties and an additional flatmate.
Melody and Leo relocated to a one-bedroom apartment in Sydney in 2021, paying $480 per week in rent.
After a year-long tenancy, the rent on their Macquarie Park flat was increased by 25% to $600 in the middle of 2022.
Melody states that she is a full-time student and only has a part-time job.
Due to their financial situation, the only plausible solution was to move back into a shared living house. This arrangement is commonly known for providing an economical way of living, as the costs of rent, power and the internet can be split.
Nevertheless, Melody and Leo are now paying an equivalent amount together for a room in their new shared living house as compared to what they originally used to pay for an entire one-bedroom apartment — $480 per week.
In order for them to be closer to Melody’s college or university, they had to move to a more distant location.
Melody Kwan and Leo Ng are living in a shared space with a flatmate, which means they are utilizing the same fridge, washing machines, and other communal areas.
Leo declares that they have no other option.
Prices are rising in all areas.
It is ironic that their former flatmate is the same one they have welcomed back into their abode in 2021.
The couple is fortunate to have a long-time buddy since relocating to their current residence from Hong Kong nearly half a decade ago, yet this does mean that they have to adapt to a shared dwelling, including the fridge and washing facilities.
Leo commented on how difficult it is to count bills.
What was the cause of individuals leaving shared housing during the pandemic?
Australia’s central bank has released a graph that displays the modification in household composition that happened at the beginning of the pandemic. Link to graph https://www.rba.gov.au/speeches/2022/pdf/sp-ag-2022-05-25.pdf
By the middle of 2020, there was a sharp decline in the population of people in shared housing.
A shift occurred where a number of individuals relocated to the home of their parents and a substantial increase was seen in the number of people living together with a romantic partner.
In general, the population inhabiting each dwelling decreased on average.
According to the Reserve Bank of Australia (RBA), the figure stood at a record low of 2.47 people in August of 2020.
A graph has been presented depicting the trend of people leaving shared houses and moving in with partners or parents.
Tim Lawless, an analyst from CoreLogic, is observing the outcomes of this phenomenon in the rental market.
He notes that there were significant changes when the COVID-19 pandemic commenced.
The need for more space was clear, which caused people to shift away from inner-city areas and towards the outer limits. Furthermore, they began to focus on regional markets instead of major cities.
The result of the population shift was that people began living in smaller households.
The Reserve Bank of Australia has observed that the wish to inhabit dwellings with fewer people has not been reflected in the number of properties constructed in recent years.
Assistant governor Luci Ellis noted in a speech last year that the rental vacancy rates quickly recovered to their previous lows despite a halt in population growth due to the closure of the international border.
The longing for more room is one thing, but the capability to get it is a different matter. It is possible that the decrease in supply may have been due to other factors.
The pandemic housing boom saw an influx of first-home buyers, in addition to the established household formation patterns.
It is conceivable that they purchased residences that had formerly been co-living dwellings.
It has been argued by some analysts that the decreasing rental stock may be due to migratory trends, including individuals fleeing cities during lockdowns and investors selling their properties.
Information regarding the current housing crisis in Australia can be found here https://www.abc.net.au/news/2022-04-28/housing-crisis-in-australia-amid-surging-rents-stagnant-incomes/101013334. This crisis is characterized by increasing rental prices and incomes that remain unchanged.
According to Mr Lawless, the need for more space is still a major factor in the lack of housing supply.
At present, the vacancy rate according to CoreLogic’s records is close to its lowest ever, at approximately 1.3 percent across the country.
CoreLogic data indicates that, as we move into 2023, the number of properties up for rent is significantly lower than the five-year mean, with approximately 50,000 listings nationwide, representing a decrease of 22 per cent.
Though not to the same extent as last year when they increased dramatically by 10 per cent in a single year https://www.abc.net.au/news/2023-01-11/rents-increase-record-cost-of-living/101840454, rents continue to rise.
The average cost of living in a metropolitan area is typically $577, and slightly lower in rural areas at $500. However, it is important to note that these prices can dramatically vary based on the individual locality, as well as the type of residence (e.g., apartment, unit, or house).
Mr Lawless states that the availability of rental properties is predicted to stay very low, whilst the demand for them increases due to an influx of immigrants.
Certainly, there will be an increase in rent prices as a result.
The effects of the rise in homelessness are far-reaching, with more people engaging in couch surfing and even returning to live with their parents.
According to CoreLogic’s Tim Lawless, rental rates will remain elevated as many people transition to more cost-effective co-living arrangements. (ABC News: Geoff Kemp)
Lawless forecasts that due to the limitation of what rent can be paid, many individuals will be required to go back to shared housing, either by relocating to these domiciles or letting out their extra bedrooms.
According to him, the current tight rental market will likely drive the formation of more and more share houses or collective households.
Research indicates that this forecast has already become a fact.
January was the most active month for Flatmates.com.au, an online platform that enables people to create a profile and join a shared living situation since the pandemic began.
The property website REA Group saw an influx of 68,000 people signing up for their platform.
Analysis of the data indicates a swift comeback of shared housing in the rental industry (Emilia Terzon).
Visits to this highly regarded website across the country have increased by 20 percent in the last year.
Claudia Conley, the community manager of the website, reported that they witnessed the greatest number of new-seeker listings since March 2019.
At this point in the calendar, forming share houses is an especially active activity as learners from both Australia and overseas search for housing before the academic year begins.
Yet, it’s not only the traditional student who is searching.
She states that there has been a noticeable growth of individuals aged 55 and above who are in search of shared housing.
Many solo parents are in search of other people in the same situation to reside with.
Ms Conley has an interest in advocating for the advantages of cohabiting. Not only can it reduce expenses, but she also believes it is beneficial for individuals who may feel isolated or who desire to be in the company of others post-pandemic.
Claudia affirms that the surge in the popularity of shared dwellings is a result of the high cost of living, which leaves people with no other choice.
She states that, regrettably, the number of people in search of shared housing far exceeds the number of properties available, leaving many without a place to call home.
The stats from the website illustrate the costliest areas to rent a room, many of which are neighbourhoods that are favoured among students and the younger crowd.
Is there a potential for the reintroduction of shared living homes to reduce rental prices?
Tim Lawless of CoreLogic does not anticipate that an increase in shared housing will result in a decrease in rental demand and costs in the near future.
It has been suggested that a major factor in the recent surge in supply has been the return of people migrating to Australia.
The ABS’s most recent data for the month of January reveals a rise in migration figures, with numbers almost returning to their pre-COVID status.
He believes that, despite the formation of larger households, the rebound of overseas migration will offset this.
He postulates that the most effective remedy is to increase the availability of rental properties, and encourages high-density housing as an ideal solution to the persisting rental pressures.
It is particularly noticeable, according to him, in the exorbitant rent fees for apartments in both Sydney and Melbourne.
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Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
