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Hobart Still Australia’s Least Affordable


Hobart remains Australia's least affordable city to rent, while major capital city markets Sydney and Melbourne's rental affordability has improved, reveals annual analysis.

The Rental Affordability Index (RAI) shows areas where rental affordability is improving as a result of Covid-19, but found that rent is still unaffordable for low-income earners in every Australian capital city.

The RAI report, released annually by SGS Economics and Planning, National Shelter, Bendigo and Adelaide Bank, and the Brotherhood of St Laurence, provides an indication on the impact of early Covid-19 responses, measuring rental affordability for households until the June quarter 2020.

▲ Source: SGS Economics and Planning, National Shelter, Bendigo and Adelaide Bank, and the Brotherhood of St Laurence
▲ Source: SGS Economics and Planning, National Shelter, Bendigo and Adelaide Bank, and the Brotherhood of St Laurence

Hobart, with a score of 96, remains the only capital city in Australia where rental affordability for the average income household is below the threshold of 100.

The average rental household has an annual gross income of $66,000 and pays around 31 per cent of its total income on rent.

Greater Adelaide is the second least affordable capital city, with an index score of 114. The index notes that incomes in Greater Adelaide have failed to keep pace with rising rents.

But as a result of the pandemic’s downward pressure on rents in metropolitan areas, the index does show that rental affordability has improved in Sydney, Melbourne, Brisbane, Adelaide, Hobart and Perth over the past year.

The five least affordable postcodes: Greater Sydney

RankPostcodeSuburbsRAI scoreRent as share of avg hhld income
12092Seaforth6546%
22085Belrose, Belrose West6745%
32085Frenchs Forest7739%
42087Forestville, Killarney Heights7739%
52027Darling Point, Edgecliff, Point Piper8535%

^ (June quarter, 2020) SGS Economics and Planning (2020) Note: RAI has been calculated using a rounded gross income of $110,000

Greater Sydney and Greater Melbourne have seen significant improvements in affordability for average income households, with the RAI scores improving by 5.7 and 8.9 per cent over the past year, respectively.

The average rental household in Greater Sydney, at June 2020, has a gross annual income of $108,300.

While the average rental household in Greater Melbourne has an annual gross income of $97,000.

The affordability scores of 126 for Greater Sydney and 140 for Greater Melbourne, both indicate acceptable rental affordability. These scores are the highest recorded for the cities in the eight years measured by the index.

In greater Brisbane, the average rental household has a gross income of $90,000 per annum.

Affordability in Greater Brisbane is making gains, with the RAI score of 129 the highest recorded for the metro-area since the index started.

Conversely, the index notes Australia's regional hubs have tightened as households move away from cities.

The five least affordable postcodes: Greater Melbourne

RankPostcodeSuburbsRAI scoreRent as share of avg hhld income
13187Brighton East8436%
23186Brighton8934%
33206Albert Park, Middle Park8934%
43104Balwyn North9532%
53188Hampton9930%

^ Source: SGS Economics and Planning. (June quarter, 2020) RAI has been calculated using a rounded gross income of $100,000

Young people, pensioners hit hardest

The index found that young people, between the age of 25-and-34, have increased as JobSeeker recipients, up to 515,000 from 185,000, as a result of the pandemic.

The index found this cohort have been most severely affected by job losses due to Covid-19.

SGS Principal & Partner Ellen Witte said young people who lost their jobs would often have been hospitality workers, paying about 35 per cent of income on rent in Sydney.

“Then, on JobSeeker, this became 69 per cent,” Witte said.

Households paying close to 30 per cent or more of their income on rent are generally seen to be in housing stress.

It is generally accepted that if housing costs exceed 30 per cent of a low-income household’s gross income (households with the lowest 40 per cent of income), then that household is experiencing housing stress (the 30-40 rule).

Pensioners also continue to face severely unaffordable rents, despite the improvement in rental prices due to the pandemic.

“In Greater Sydney and ACT, single pensioners may need to spend 74 per cent to 79 per cent of their income to enter into a rental agreement,” Witte said.

“For couple pensioners' this is 52 per cent to 53 per cent.”

While the JobSeeker supplement has improved rental affordability for the approximate 689,000 households that were already on, Witte says rental affordability has decreased substantially for most new JobSeeker recipients who lost their jobs.

For people on JobSeeker, Witte said rent costs between 42 to 69 per cent of their income in every capital city.

“There is not one capital city in Australia where a JobSeeker recipient can rent affordably.”

The latest Corelogic data released Tuesday shows property prices across all capital cities increased over the month for the first time since January.

Canberra and Hobart led the price rise with values increasing 1.9 per cent in November, followed by 1.4 per cent in Hobart, 1.3 per cent in Adelaide and 1.1 per cent in Perth.

Nationally, property prices recorded an increase for the second consecutive month in November, up 0.8 per cent.


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Article originally posted at: https://www.theurbandeveloper.com/articles/hobart-australias-least-affordable-city-to-rent-while-sydney-melbourne-improve