Share houses make a comeback as the rental crisis continues and people lease out spare rooms
The demand for share houses is back to pre-pandemic levels as vacancy rates sit at historic lows, according to data from a flatmates listing service owned by property website REA Group.
But the data also shows that in many key suburbs, moving in with a flatmate is not a cheap alternative to living alone. And there are concerns renters will keep rising this year.
Melody Kwan and Leo Ng’s experience highlights the difficulty of this trend.
When the pandemic hit in early 2020, the young couple in their 20s were living in a two-bedroom apartment they shared with a flatmate.
In 2021, Melody and Leo moved into their own one-bedroom apartment across town in Sydney which cost $480 a week.
But after a 12-month lease, the rent on their Macquarie Park apartment was hiked in mid-2022 by 25 per cent, to $600.
“I’m a full-time student. I only work a part-time job,” Melody says.
“I kept telling everyone this is crazy.”
Financially, their only choice was to move back into a share house, which has historically been seen as a cheaper option due to the cost of rent and overheads such as internet and power bills being shared.
However, in Melody and Leo’s new share house, they are now paying the same amount together for a room as initially did for a whole one-bedroom apartment — $480 a week.
They have also had to move further away from Melody’s university.
“We have no choice,” Leo said.
“Everywhere is getting expensive.”
Ironically, their new flatmate is the same one they left in 2021.
Luckily, he is a good friend that the couple has known since they moved here from Hong Kong about five years ago, but that still means they’re back to communal living, which includes sharing a fridge and laundry spaces.
“It’s hard for bill counting,” Leo said.
Why did people leave share houses during the pandemic?
A graph from Australia’s central bank shows the shift in household make-up that occurred at the start of the pandemic.
By mid-2020, the number of people living in share houses dived.
Some people moved back in with their parents, and there was also a noticeable uptake in people living with a partner.
Overall, the average number of people living in a property dropped.
Reserve Bank of Australia (RBA) data shows it was at its lowest ever-number at 2.47 people as of August last year.
CoreLogic property market analyst Tim Lawless has been watching the repercussions of this trend play out in the rental market.
“We saw some remarkable shifts at the beginning of COVID,” he says.
“For obvious reasons, people were looking for more space. They were moving away from inner-city areas towards the outer fringes. They were looking towards regional markets rather than capital cities.
“And the by-product of that demographic trend was that we started to see households becoming smaller.”
The RBA notes that our desire to live with fewer people wasn’t matched by the number of properties built over the last few years.
“This helps explain why rental vacancy rates quickly returned to low levels even though the international border was closed and population growth declined to be close to zero,” assistant governor Luci Ellis said in a speech last year.
“The desire for more space is one thing; the ability to get it is another.”
There are other reasons why supply may have been curtailed.
Aside from household formation patterns, many first home buyers entered the market during the pandemic housing boom.
It is possible they bought properties that had once been shared houses.
Some analysts have argued that migratory patterns, such as people moving to regional areas to escape cities in lockdown, and investors selling up properties, has also reduced the rental stock.
Mr Lawless believes the desire for space is still one of the biggest reasons for the supply crunch.
And right now, vacancy rates are still near the lowest they have ever been on CoreLogic’s records, at about 1.3 per cent nationally.
As we push into 2023, the number of places being listed for rent is 22 per cent lower than the five-year average, CoreLogic data shows, at about only 50,000 listings nationally.
Rents are still rising, although not as fast as they did last year when they surged 10 per cent in just 12 months.
The average price of a capital city rental is $577, and slightly less in the regions at $500. There are, of course, big variances depending on more granular locations, and also whether the space is an apartment, unit or house.
“It does look like the rental supply is going to remain very low at a time when demand is rising from overseas migration,” Mr Lawless says.
“The by-product, of course, is going to be further upward pressure on rents.”
“There’s a lot of negative social outcomes around increased homelessness, more couch surfing, more people moving back in with their parents.”
Mr Lawless predicts that many people will be forced back into shared housing, either by moving into their homes or by leasing out their spare rooms, simply because they have reached their limit on how much rent they can pay.
“We are going to see more and more share houses or group households forming simply due to the fact that rental markets are as tight as what they are,” he says.
Some research suggests this prediction is already a reality.
A website that lets people create a profile to join a share house, Flatmates.com.au, had its busiest month in January since the pandemic started.
More than 68,000 people signed up to the platform owned by property website REA Group.
The website, which is one of the biggest of its kind in the nation, has also seen a 20 per cent increase in visitations in 12 months.
“We saw the most new-seeker listings since March 2019,” the website’s community manager Claudia Conley says.
This time of year is a traditionally busy period for share house formation, as students from both Australia and overseas look for accommodation before the university school year.
However, it’s not just the stereotypical student who is looking.
“We’re actually seeing a large increase of people over the age of 55 looking to share accommodation,” she says.
“We also see a lot of single parents looking for other single parents to live with.”
Ms Conley is keen to promote the benefits of living with others. As well as cutting down on overheads, she says it’s also beneficial for people who may be feeling lonely or want to be around others post-pandemic.
However, Claudia believes the share house boom is definitely driven by the cost of living, with some people simply having no other option.
“There’s a really large number of people looking for shared accommodation. But unfortunately, there are not enough properties available to give everyone a place to live,” she says.
The website’s data shows the most expensive places to rent a room, with many of them in suburbs that are popular with students or younger people.
|
Melbourne |
Price for a room |
Seekers vs Listings |
|---|---|---|
|
East Melbourne |
$620 per week |
68:1 |
|
St Kilda |
$440 per week |
42:1 |
|
Docklands |
$400 per week |
74:1 |
|
Sydney |
Price for a room |
Seekers vs Listings |
|
Milson’s Point |
$870 per week |
5:1 |
|
Woolloomooloo |
$575 per week |
80:1 |
|
Bondi Beach |
$550 per week |
79:1 |
|
Brisbane |
Price for a room |
Seekers vs Listings |
|
Balmoral |
$400 per week |
8:1 |
|
BrisbaneCity |
$370 per week |
86:1 |
|
Cornubia |
$350 per week |
2:1 |
The lowest someone will pay in the three major capital cities is $150 a week for a room in a suburb in outer Sydney near Liverpool, with the other cheaper suburbs all about $180 a week.
|
Melbourne |
Price for a room |
Seekers vs Listings |
|---|---|---|
|
Coburg North |
$180 per week |
17:1 |
|
Cairnlea |
$180 per week |
2:1 |
|
Ringwood East |
$180 per week |
3:1 |
|
Sydney |
Price for a room |
Seekers vs Listings |
|
Warwick Farm |
$150 per week |
3:1 |
|
Wattle Grove |
$180 per week |
3:1 |
|
Colyton |
$185 per week |
3:1 |
|
Brisbane |
Price for a room |
Seekers vs Listings |
|
Bellbird Park |
$180 per week |
2:1 |
|
Everton Hills |
$184 per week |
6:1 |
|
Caboolture South |
$195 per week |
3:1 |
Will the return of share houses cut rent prices?
CoreLogic’s Tim Lawless says he doesn’t expect a rise in share housing will lead to much less demand for rentals, and thus prices, any time soon.
He believes one of the biggest tipping points for supply in recent months has been the return of migration to Australia.
The latest ABS data for January shows migration numbers are slimming up and are almost back to pre-pandemic levels.
“If we are seeing larger household sizes forming, I think that will be more than compensated for by the bounce-back of overseas migration,” he says.
He believes the only real solution is to build more places to rent, and suggests high-density housing is a good option because that is where rental pressures persist.
He says it is especially obvious in the high rents charged for Sydney and Melbourne apartments.
The Albanese government went to the previous election with a $10 billion pledge to build more housing across the country.
The minister for housing, Julie Collins, told ABC News this would flow through to about 30,000 new social and affordable homes in the dedicated fund’s first five years.
Almost one year after the election, the creation of that fund has not yet passed the Senate.
Mr Lawless says this fund will be a “slow burn” to help supply.
“I think there’s no real short-term or immediate solution to this lack of rental supply we’re seeing across the housing market,” he says.
As well as seeker listings, Flatmates.com.au also lets people rent out their spare rooms, which is how it collects this aggregate data.
Listings for spare rooms are also up to the highest they’ve been since January 2021, which suggests there is a glimmer of hope for supply, and a possible indication of more people leasing out spare rooms to deal with rising mortgages or the cost of living .
“Recent data showed that there was actually 12 million empty rooms around Australia,” Ms Conley says.
“That’s a huge amount of supply available.
“We’d love to see some of those properties being listed as a room to rent to help take pressure off the rental market.”
With more uncertain times ahead for the rental market, Melody and Leo are worried they’ll face another unbearable rent hike when their new apartment’s lease expires.
They are exhausted from moving home, having done it three times in as many years.
“It’s really hard moving in and moving out all of the time,” Leo says.
“I haven’t really fully unpacked because they may increase the prices again. I may need to move again.”
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