Is a Rental Crisis Coming?

George Markoski The rental crisis is going to continue well into the 2030s. The next four years, we’re going to miss the target every single year. We’ve got more people coming to Australia. We’re not building enough houses, and we’re literally going to be building fewer houses in the future, even though we need more. But I’ve noticed already a lot of people going from property to shares. So nobody agrees what happens next. Three forecasts, three different conclusions. The market will decide who’s right. George Markoski Hi there, George Markoski coming to you for the Positive Property Show. Welcome. Is a rental crisis coming? Well, Australian renters just copped an $11,300 per year pay cut. That’s because of rental prices going up. So is it coming? It’s already here, but it’s getting worse, and I’m going to go through the numbers for you tonight. George Markoski Now, you might be seeing that I’m recording this earlier than normal. That’s because I’m currently here in Bali, and I’m going to leave for the airport in one hour exactly. Going to Taiwan for a Taiwanese wedding with my friends Davis and Carol, which is interesting because I’ve never been to Taiwan or a Taiwanese wedding, and I love checking out different cultures. And in Taiwan, when it comes to weddings, what you do is you give cash. It’s called the red envelope. And you can’t give just any cash. You need to go to a bank and specify crisp, brand new, never-touched money that all banks have got, especially for gift giving, because if it’s been touched, it’s no good. Also, it has to be an even number — can’t have the number four or anything like that. And then what you’ve got to do, depending on your connection, is figure out how much to spend. So if you give too much money, that’s rude because that means they’re going to have to reciprocate, because they’ve got a log and they’ve got everything that you’ve given them, so when they come to something, they need to match it. So if you give 8,000 NT to them, well then they need to give you 8,000 NT next time they see you. But if you give too little, that’s rude too. So it’s one of those things. Luckily, I had ChatGPT tell me. I’m like, “Okay, I’m flying from overseas with friends. What do I do? I’m not family.” And then I found that number. So look forward to trying out some new food and everything else like that. George Markoski Now, I’ve got a six-week-old son, and I guess I’m going to miss him because hanging out with him every day is awesome, but you’ve got to do these things. So anyway, that’s why I thought I’d pre-record this and go through and just stick to my commitment, because I’ve committed to doing 52 of these events this year. Every Thursday, I’m going to give you new property information that you’re going to find useful and helpful to help you build a portfolio. So let’s get started. George Markoski State of the nation. Capital city rents up 6% in a single year. So look at this graph. Brisbane leads the nation with 7.2% annual growth. Perth and Adelaide also growing above the 6% national average. Even Melbourne, the weakest market, is still recording positive growth. This isn’t isolated to one region — every capital city is tightening. George Markoski So this is part of the story of the rental crisis. In the last five years, Australian advertised rents have gone up 42%, and as I said in the headline, the typical renter household now pays an extra $11,300 more each year, which you could say is an $11,300 pay cut — but it’s worse than that. I’ll tell you why it’s worse. Because what happens is when you pay your rent, you’re paying with post-tax dollars, not pre-tax dollars. So in order to pay $11,300 more in rent, it’s not enough to make an extra $11,300. Because look at this number — and this is the big issue, and this is why we’ve got to look at pre-tax and post-tax, why it’s so important. So if we get this calculator out, if you earn $20,000 and let’s say you pay 37% tax, that equals $12,600. So literally, if you were to cover that extra $11,300 in rent, you need to make almost an extra $20,000 if you’re on the 37% tax bracket. So this is mind-blowing because it makes it much, much worse. If it was only $11,300, it wouldn’t be as hard. George Markoski Wage growth has failed to keep up with the pace of rising rents, and the supply shortage shows no sign of easing, and neither major party has got any credible plan to fix it. None of them — not the major parties, not One Nation, none of them. Liberals, Labor, doesn’t matter. And this is the problem. This is the real issue. George Markoski Rent growth is accelerating, not slowing. So Q1 2025 it was 5.1%, Q2 was 5.3%, Q3 was 5.5%, Q4 was 5.6%, Q1 2026 was 5.7%, and now we’re at 5.9%. So asking rent growth rose from 5.7% in Q1 to 5.9%. The expected relief still hasn’t arrived. Demand continues to outpace new housing supply. George Markoski This is the big issue. We’re at 112,400 homes behind target. So in just 21 months, the housing supply gap has widened every quarter. The housing target is already 27% behind. The target for 21 months was 420,000 houses, but we actually got 308,000 dwellings delivered. So that’s just 73% of the target. Now, this is the big kicker — the gap is widening every quarter. So it’s not getting closer. We’re not getting better. We’re getting worse every quarter. It’s a compounding effect. George Markoski You look at Albo’s housing target of 240,000, and we look at dwelling completions in Australia from 1986 to 2025. Basically, the target is 240,000, which is 66,000 more homes than we built last year. But home completions are at the lowest level since September 2022. There are labour shortages, building insolvencies, and rising costs continue to constrain supply. Not only that, getting a tradie is hard — everything’s difficult. Costs have gone up. George Markoski So there are 274,000 homes stuck in a broken pipeline. This is our dwelling pipeline — a total of 274,000 in the pipeline: 30,000 approved but not started, and 244,000 unfinished and unbuilt. So 244,000 dwellings remained under construction in Q1 2026, and another 30,000 homes were approved and not yet commenced. A record pipeline shows the problem isn’t demand — it’s delivery. And this is the issue. We just can’t deliver enough quality properties in the right amount of time. We don’t have the capacity in Australia. George Markoski The rental market is still starved for supply, and this is why many people are moving into co-living. If you look at our vacancy rate, it’s 1.7% at the moment. Now, a healthy vacancy rate is 3%. That’s the benchmark. And 1.7% is very, very hard because tenants still have no negotiating power. A lot of regional markets are below 1% vacancy. And this is a big issue because this is what’s driving the rental crisis. It’s going to get worse. George Markoski Now, the share of gross household income spent on rent — back in 2021, it was 27%, and today it’s gone up to 33%. Usually, a good property manager, when they do an application for rent, they make sure that the rent you’re paying is no more than 30% of your salary, because that’s going to be very comfortable for you to actually rent. Now, the issue is that 33% now absorbs around the average household gross income, and housing stress is no longer temporary — it’s just become normal. Some regional renters are paying 35% of their income. George Markoski So what does this mean? Well, prices are going up, rents are high. This creates money stress for the average Australian. The fact of it is, the Australian dream of owning a home and getting ahead is gone. It is finished. This government has slowly destroyed that through their policies of immigration, tax, and everything else they’re doing. They are literally destroying the Australian way of life. And the fact of it is, pretty soon, it’s going to be very rare for people to own their own home. George Markoski So adults are crowding together just to afford shelter. More adult children are staying in the family home for longer. House sharing has become the new normal. NHSAC says household formation is being crushed. Demand is disappearing — it’s being forced into different arrangements. So if you look at this, the average adults per household back in July 2005 was around about 2.03, and now it’s at 2.1, and that’s going to keep going up. And that’s what’s going to happen in Australia. This happens in a lot of other countries. I’m in Bali at the moment. A lot of people co-share here, the locals. George Markoski The next four years, we’ll build fewer homes than last year. That’s the fact of it. So even optimistic forecasts miss the 240,000 target. The 2023/24 actual was itself well below target. The rental crisis is going to continue well into the 2030s, and no government forecast suggests a supply resolution. So you look at our target of 240,000 homes, and the actual was at 185,000, and it looks like the next four years we’re going to miss the target every single year. And this is the optimistic version. George Markoski So what does that mean? Well, what this means is we’re just not going to have enough supply. We’ve got more people coming to Australia. We’re not building enough houses, and we’re literally going to be building fewer houses in the future, even though we need more. We’re not even going to hit the target that we’re at, and what’s going to happen is rents are going to be pushed higher, and this is going to affect housing prices as well. George Markoski So the policy debate — negative gearing changes, who’s right, Treasury or Westpac? Nobody agrees what happens next. Treasury says 35,000 fewer homes — government modelling says the policy will reduce new housing supply by 35,000. Independent modelling also expects fewer new homes — they say 22,000 fewer homes. Westpac says there’ll be 45% more investment in new builds — they expect new investor demand to rise 45%. Three forecasts, three different conclusions. The market will decide who’s right. George Markoski Now look, I believe more investors are going to be moving into new properties, definitely. But I’ve noticed already a lot of people going from property to shares. There’s quite a big shift already happening. I can’t see how, even though investors are going to move into new builds, we’re just going to get the new builds. That’s the issue, right? George Markoski This is what it means for investors though. New builds are becoming the default choice now. Because existing property gets no negative gearing — lower investor demand, tax advantage reduced. Negative gearing on new builds is retained — strong investor demand, tax incentive persists. So people are seeing property prices dropping, but this may be limited to existing properties, and maybe new builds will be exempt. I’ll tell you why this may happen. Because one, it costs a certain amount of money to build a house, and you can’t change that floor. The cost of buying the land and building the property is the floor that cannot go down. You’re not going to be able to get the property for less than what it costs to buy the land and build it. Two, on top of that, because you can’t get the benefit of a secondhand property as an investor, there’s going to be a lot more demand for new properties. We’ve only got a certain capacity to build. There’s going to be more competition, so more people are wanting to buy. And with the extra tax benefits, a new build is just worth more money. Think about it that way. George Markoski So why does this policy push prices higher? There’s the chain reaction. Policy changes remove tax benefits on existing homes. Investors shift to new builds. Demand concentrates on a limited pool of properties. Supply still can’t keep up. New build prices face upward pressure. Fascinating. George Markoski 240,000 homes per year are needed to meet the National Housing Accord. Australia built 173,000 in the last year, and the pipeline is getting worse, not better. Investors aren’t going to leave — they’re going to shift, and they’re going to shift in two ways. Some investors have already moved into shares. They might do that for a little bit. But then investors that are buying existing property are going to move into other property. So at the moment, investor loan mix is very interesting. 75% of investors buy an established property, and 25% buy a brand-new property. What they expect is that in the future it’s going to be 55% established property and 45% new property. So the investor demand moves from existing homes to new builds. Westpac expects new build lending to approach 50%. Tax incentives remain high for newly built homes. More capital flows to new housing. George Markoski Now, also, there’s another thing we need to layer on top of this. Borrowing capacity for an existing property compared to a new property will be very different because of the tax savings. So if you’re getting around about $15,000 depreciation on a property, let’s do the calculation here. We’ve got $15,000 and let’s say it’s around 30% tax — that’s $5,000. That gives you an extra $100 a week of servicing for an investment property that’s brand new compared to a used one. And that’s the other thing. Now, don’t quote me on this — I’m not a finance expert, but I’m just doing numbers on the back of an envelope to give you an idea. The fact of it is, investors buying a new property have got a higher borrowing capacity than investors buying an existing property. And borrowing capacity is one of the biggest constraints when it comes to investing. And when you release the constraint in one market and create that constraint in another market, we could end up with a two-tier property system. George Markoski This experiment was done a long time ago — actually, no, we got rid of negative gearing completely back then. So we’ve never done this experiment where we’ve got two different markets, because existing homes and new homes are a different beast. One is a tax saving and the other one’s a tax issue. And that should be very interesting to see how that plays out. So I’m very curious. George Markoski But my thoughts are, when you do this experiment and it becomes financially better to buy brand new, it seems logical that brand-new properties will be worth more money. But time will tell. So the fundamentals still point one way. Our population is growing, our supply is severely constrained, and investor demand is shifting. So the question isn’t whether there’s an opportunity. The question is, where is the opportunity? And we know where that is. George Markoski What I want to do is talk about two of our clients, Craig and Tanya Collins. While everyone else was waiting to see what the government would do, Craig and Tanya were settling. They didn’t win the lottery. They used equity that was already sitting in their own home, doing nothing. $110,000 for the Caboolture deposit. They settled October 2025 at $554,000, and it’s now valued at $710,000. Then their Whyalla build completed April this year, already $62,000 in front. Two properties, nine months, $217,000 in current profit. George Markoski Now, this is the kicker. The deposit money was already theirs, but it was just locked in the wrong asset — their own lounge room. They literally had equity sitting in their lounge room doing nothing. And the difference between Craig and Tanya and most Australians isn’t about money. Many Australians have got equity sitting in their lounge room. It’s the decision and the courage to go forward. And that’s what it’s all about. George Markoski Thank you, everyone, for watching. While you’re watching this, I’m actually going to be on a plane. If they’ve got Wi-Fi, I might try to log in. If not, thank you, and I’ll see you next Thursday. Bye-bye.