Australia’s rental crisis is increasingly affecting older Australians, particularly those aged over 67, who now represent the largest group receiving Commonwealth Rent Assistance. This demographic shift comes as former Reserve Bank board member Warwick McKibbin warns of potential interest rate hikes, forecasting four increases in the next two years.
Australians in the 67-plus age group have become a significant portion of those requiring rental assistance, with 23.7 percent of recipients being age pension holders, according to new figures from the Productivity Commission. This demographic is more likely to face financial struggles if they did not enter the housing market earlier or if they have experienced divorce.
As rental options dwindle, McKibbin predicts that the cash rate could rise to 4.6 percent by late 2026, marking the first increase since November 2011. He identifies the current cash rate of 3.6 percent as insufficient in combatting inflation, which currently sits at 3.8 percent. “Monetary policy in Australia is currently too loose, and as a result, inflation is high and rising,” McKibbin remarked.
The impact of this crisis is particularly pronounced for older Australians, who often struggle to find suitable rental arrangements. According to Maiy Azize, spokeswoman for Everybody’s Home, older individuals typically prefer not to share housing with strangers, making it challenging for them to secure affordable accommodations.
In the last financial year, the Federal Government allocated $6.4 billion for Commonwealth Rent Assistance. Without this support, 74.8 percent of low-income households would have faced rental stress, while 43 percent of those receiving assistance still experienced financial strain.
Investor activity in the property market remains robust, with last year seeing an 8.5 percent growth in investment properties, according to recent data from the RBA. However, should interest rates rise again, landlords may be compelled to sell, further tightening the rental market. Cotality’s head of research for Australia, Gerard Burg, noted that “in that sort of environment, expect vacancies to remain around historic lows.”
With the introduction of new regulations on debt-to-income ratios, prospective buyers may find it increasingly difficult to enter the property market. Starting March 15, 2024, restrictions will limit loans with a debt-to-income ratio of six or more to 20 percent of all loans, a move aimed at cooling an overheated market.
As the rental crisis intensifies, older Australians may find themselves facing an uncertain future, struggling to navigate a market that does not cater to their needs. The combination of rising interest rates and limited rental options could lead to significant challenges for this vulnerable population.
