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. 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% of its total income on rent. It’s important to note with RAI’s, the higher, they are, the better – a ranking between 80-100 demonstrates an area is “unaffordable”.
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.
| Rank | Postcode | Suburbs | RAI score | Rent as share of avg hhld income |
|---|---|---|---|---|
| 1 | 2092 | Seaforth | 65 | 46% |
| 2 | 2085 | Belrose, Belrose West | 67 | 45% |
| 3 | 2085 | Frenchs Forest | 77 | 39% |
| 4 | 2087 | Forestville, Killarney Heights | 77 | 39% |
| 5 | 2027 | Darling Point, Edgecliff, Point Piper | 85 | 35% |
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% 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.
| Rank | Postcode | Suburbs | RAI score | Rent as share of avg hhld income |
|---|---|---|---|---|
| 1 | 3187 | Brighton East | 84 | 36% |
| 2 | 3186 | Brighton | 89 | 34% |
| 3 | 3206 | Albert Park, Middle Park | 89 | 34% |
| 4 | 3104 | Balwyn North | 95 | 32% |
| 5 | 3188 | Hampton | 99 | 30% |
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% of income on rent in Sydney. On JobSeeker, this became 69%.
Households paying close to 30% or more of their income on rent are generally seen to be in housing stress.
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% to 79% of their income to enter into a rental agreement,” Witte said. “For couple pensioners’ this is 52% to 53%.”
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.”
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