The term ‘rental crisis’ is now commonplace in discussions about the property rental market – but what does it really mean?
In brief, it refers to a situation where the demand for rental properties significantly outweighs the available supply. This causes rents to skyrocket and poses challenges for both tenants and property owners.
Let’s look at why this is happening in today’s market.
According to Jaime Pratt, Head of PM at VPM, the imbalance between supply and demand is one of the primary drivers of the current rental crisis.
“As populations grow and urbanise, the need for housing increases,” she says. “However, at the same time, there’s often a lag in the construction of new rental properties, which leads to a scarcity of available homes. It’s this heightened demand that naturally causes rents to climb.”
Economic factors also play a crucial role. People are migrating to areas with robust job markets and economic growth in search of employment opportunities. This influx of residents further intensifies the competition for rental properties in these areas, putting upward pressure on rental prices.
Jaime explains that the additional cost of construction materials and labour can also contribute to higher property development expenses, which in turn influence rental rates.
“Government policies and regulations are yet another layer that also impacts the rental market,” Jaime advises. “Stringent zoning laws, lengthy approval processes, and other regulatory hurdles can slow down the construction of new rental units, which merely intensifies the supply-demand imbalance.”
In some cases, rent control measures may limit a landlord’s ability to increase rents, but this can have unintended consequences, such as discouraging property investment and maintenance.
Another factor that can aggravate the rental crisis is investor behaviour and market speculation. Jaime explains that investors may be more inclined to purchase properties for resale rather than long-term rental when they anticipate future price increases. “This reduces the number of rental properties available, which creates strong competition among potential tenants.”
A multifaceted approach is needed to address the rental crisis. Jaime believes that increasing the supply of affordable housing through streamlined development processes, incentivising property investment, and implementing effective rent control measures could be potential solutions. “There needs to be collaborative efforts between the government, real estate industry, and community stakeholders to establish a more balanced and sustainable rental market,” she says.
A rental crisis occurs when the demand for rental properties surpasses the available supply, leading to soaring rents. Factors such as economic growth, government policies, and investor behaviour are significant contributors, but by understanding the root causes, effective solutions can be implemented to create a more equitable rental market for both tenants and property owners. Contact our experienced property managers for a chat about navigating through any rental concerns you might be experiencing and see how we can help.