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‘Zombie’ homes are fueling Australia’s rental crisis, experts say

'Zombie' homes are fueling Australia's rental crisis, experts say

Real estate experts say Australia is experiencing a rental crisis that’s set to worsen without government intervention, and so-called “zombie” homes are fueling the problem.

A zombie home is a property that is occupied only part of the time – such as a holiday house listed on Airbnb – that is not available to rent on a short or long term lease but can generate large profits for the owner.

For example, a good property in a regional town, near the beach or one in inner Sydney could fetch $1000 for a weekend but just $800 on a weekly basis under a leasing arrangement, First National Real Estate CEO Ray Ellis said.

“It’s a lot easier to take your investment property out of the full-time rental mix and put it into the short-term rental mix which is basically AirBnB or weekend accommodation,” Mr Ellis told news.com.au.

“If you could get $800 a week by having someone there full-time but you can get $1000 for a Saturday and Sunday, and don’t have to go through all the extra legislation requirements, you’ll do it, because you’re making the same return,” he said.

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Throughout any city there’s “hundreds if not thousands” of zombie homes, especially in coastal areas, that are occupied one or two days a week, Mr Ellis said.

“There’s now too many occurring in most cities in Australia.”

The benefit for owners – apart from the financial element – ​​was not having the long-term commitment of dealing with renters, he added.

Zombie homes are widespread, with last year’s census revealing that during lockdown and while Australia’s borders were closed, there were more than 1 million unoccupied properties.

While it’s a win-win for landlords, renters are suffering with rents souring and long queues of desperate prospective tenants lining up to inspect properties. This has forced some to live in their cars, a motel or caravan – even couch surfing – to keep a roof over their heads.

“Investors are putting their properties out for Airbnb, but it’s taking rental properties away from renters and that lack of … properties available to rent is driving demand and prices up,” Finder money expert Rebecca Pike told 7NEWS.com.au.

PropTrack’s latest rental report for the June quarter found the number of renters per property listed on realestate.com.au had risen 28 per cent year-on-year across capital cities, with Sydney and Melbourne experiencing the greatest increase.

The number of rental listings in Sydney fell 21 per cent in the last year. The largest declines in listings were recorded in Melbourne (-25.7 per cent) and Brisbane (-24 per cent).

Overall, the number of new listings coming on to the market was 13.8 per cent lower than the decade average in June.

The strong demand for rentals and limited supply was leading to significant increases in advertised rent prices, the report found.

Rental prices in Sydney have grown by 6 per cent over the past year, after having fallen throughout the early part of the pandemic.

The median rental price for a house in Sydney is currently $620 a week and $500 for a unit.

Nationally, the median weekly rent for a house is $490 and $440 for units.

With higher land tax charges for investors and larger interest rates, many of these costs are being passed on to renters causing rents to rise even further, the report added.

Ms Pike told 7NEWS.com.au the rental crisis needed urgent action and would get worse over the coming months.

“We’re definitely seeing that demand for rental housing going up because we have so many more people coming into the country, whereas during Covid we really saw that drop,” she said. “There is definitely more demand at the moment, but there’s also less supply.

“Also with the RBA cash rate, if investors are paying more for their loans, they’re potentially passing that on to renters.”

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Australia rent prices: Real cause of property market crisis revealed

Australia rent prices: Real cause of property market crisis revealed

The cause of Australia’s worsening rental crisis runs far deeper than the economic pressures behind rising interest rates and soaring inflation, a prominent real estate expert has revealed.

Ray Ellis says the crisis will deepen without swift action from state governments on social housing and new build “red tape”.

Mr Ellis, former director of the Real Estate Institute of Australia and First National Real Estate chief executive, warned Australia has nowhere near enough homes to cater for its population, let alone accommodate migration increasing in the wake of the Covid pandemic.

He said state governments must urgently take responsibility for the immediate need for more social housing to remove pressure on the private sector.

“Between 1955 and 1964, state governments built about 140,000 social houses. We’ve never built that amount again,” Mr Ellis told news.com.au.

“There have been government incentives for landlords to become property owners and rent properties, and that has been the mainstay of any government policy.

“Social housing has become the responsibility of the private sector.”

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Significant lags on new developments largely hindered by “bureaucracy” also meant it was taking several years before construction could even begin.

“In the last 25 years, the provision of new land to build more houses by more private developers has been very slow and very cumbersome,” Mr Ellis said.

“It will take two years to go from the concept to the start of construction.

“Its just bogged down in bureaucracy by non-action or slowness in action.”

Slow-moving developments and underfunded and underresourced social housing were major contributors to the crisis, alongside a shift in attitude among landlords, Mr Ellis said.

He had observed landlords becoming frustrated at new regulations weighted towards tenants and immense pressure to provide rent so low that it would barely cover their costs.

“A landlord wants nothing more than a good tenant, so they will provide rent and services at a reasonable rate and comply with government legislation, but it’s not their responsibility to reduce their rent below what their source of income is,” he said.

Many landlords had become entirely turned off maintaining rental properties and as a result were offloading them, often to investors keen to make the most profit possible by using them as “zombie homes” such as Airbnbs.

“This is a genuine crisis. It doesn’t matter where you are in Australia, there is no rental stock available,” Mr Ellis said, adding that as “migration picks up again, it’s going to get even worse”.

“Australia is just not building enough houses for us to live in, let alone to be rented.”

Impact of ‘zombie homes’ on rental market

A zombie home is a property that is occupied only part of the time – such as a holiday house listed on Airbnb – that is not available to rent on a short or long term lease but can generate large profits for the owner.

Throughout any city there are “hundreds if not thousands” of zombie homes, especially in coastal areas, that are occupied one or two days a week, Mr Ellis said.

“There’s now too many occurring in most cities in Australia.”

The benefit for owners – aside from the financial element – ​​is not having the long-term commitment of dealing with renters, he added.

Zombie homes are widespread, with last year’s census revealing that during lockdown and while Australia’s borders were closed, there were more than one million unoccupied properties.

While it’s a win-win for landlords, renters are suffering from soaring costs, and have to put up with long queues of desperate prospective tenants lining up to inspect properties. This has forced some to live in their cars, a motel or caravan – even couch surfing – to keep a roof over their heads.

“Investors are putting their properties out for Airbnb, but it’s taking rental properties away from renters and that lack of … properties available to rent is driving demand and prices up,” Finder money expert Rebecca Pike told 7NEWS.com.au.

PropTrack’s latest rental report for the June quarter found the number of renters per property listed on realestate.com.au had risen 28 per cent year-on-year across capital cities, with Sydney and Melbourne experiencing the greatest increase.

The number of rental listings in Sydney fell 21 per cent in the last year. The largest declines in listings were recorded in Melbourne (-25.7 per cent) and Brisbane (-24 per cent).

Overall, the number of new listings coming on to the market was 13.8 per cent lower than the decade average in June.

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Business

Rental properties Australia: How much rent has increased in your suburb

Rental properties Australia: How much rent has increased in your suburb

Renters are suffering from “ridiculous” rent hikes due to a chronic housing shortage, as city-dwellers flood regional markets and landlords flip rental properties to short-term housing to accommodate an influx of tourists.

Suburb-level analysis collected by PropTrack exclusively for The Oz revealed Killcare Heights on the central coast of NSW experienced the greatest rent increase over the past 12 months at 72.6 per cent, followed by Rainbow Beach on Queensland’s south coast (72.5 per cent) and Stahan in western Tasmania (68.4 per cent).

Killcare Ray White agent Sue Rallis said some local properties have risen from $700 to $1500 a week since the pandemic began, due to Sydneysiders making the most of a Covid-induced at-home lifestyle and moving into regional areas.

“People are happy to come out of the cities and move regionally, which has pushed up the rent over the last year or two,” she said.

“It’s been hard for the locals. They have been living in an area that a lot of people didn’t want to live in, and have been paying quite low rents there over the years. Now it’s very difficult for the locals to afford some of the rents.”

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Median weekly rental prices in June were up 7 per cent on the same month last year, marking the strongest annual rental growth recorded since before 2015. Rising prices have been felt the most regionally, where they increased 11.4 per cent year-on-year to June, compared to 4.4 per cent in the capital cities.

This came as the total supply of rentals dropped 27.7 per cent below its decade average.

PropTrack director of economic research Cameron Kusher said a devastating lack of supply has driven prices upwards, as fewer owners put their second properties up for rent.

“A lot of people who have bought quote unquote ‘investment properties’ aren’t necessarily buying them to make them available for rent, they’re buying them as second homes,” he said. “You’ve also got the added pressure now that domestic and international travel is back that the supply of rental stock is spinning out because people are putting their properties into short term rental accommodation, rather than long term.”

Mr Kusher said rental growth in inner-city areas has been “pretty weak” over the past two years as tenants stayed put, but has suddenly increased over the past six months after long term lockdowns ended.

“We have seen again in Sydney and Melbourne in those inner and middle ring markets in the apartment markets in particular, it has been very hard to rent out a property over the last few years,” he said.

“So, a lot of people sold out of their investment properties, and we haven’t seen a lot of developers building new one and two bedroom apartments. Therefore, we haven’t had that increase in supply we needed to keep up with demand.”

When renewing her lease last month, Leane Van Essen’s landlord requested the rent go from $450 to $550 a week for a one-bedroom apartment in North Sydney.

Unable to afford the “ridiculous” 22 per cent increase, the 29-year-old was given 60 days to find a new apartment.

“I had to find a new place super quickly, but then I got Covid and couldn’t go look at apartments, which was incredibly stressful,” she said. “They kept calling me, trying to rush me out, even though I still had my 60 days.”

Eventually, Ms Van Essen was forced to find a stranger online to move in with, settling in a two-bedroom apartment in Sydney’s inner-city suburb of Mascot for $750 a week.

Similarly, Ellen Mezger, 25, was asked to bump up her rent for a two-bedder in Sydney’s Waterloo from $620 to $800 a week when her lease expired this month.

She said “a lot of sacrifices”, including giving up her gym membership, would have to be made if the rent increased that much.

Kusher said it would be a while before rent costs dropped again as landlords feel the increasing burden of skyrocketing interest rates, and pass them onto their tenants.

“Landlords will be trying to pass on as much of those increased costs as they can to their renters, so that’s something that renters are going to be facing,” he said.

“Obviously, for renters, there’s quite a lot of incentives to try and buy your first home. The government’s got a Shared Equity scheme, they’ve got a low deposit scheme in NSW from January next year, you’re going to be given the option to pay land tax as opposed to stamp duty. At some point, people will look at it and go, you know, I can be slugged with higher rates every six months, or maybe it’s time to take up one or two of these schemes and buy.”

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