Rising house prices and tight rental supply are reshaping Australia’s housing market, as a new Colliers report points to a shift toward a “rental-first” system.
The Great Australian Dream is being replaced by a lifetime of renting, as global investors pour millions into a future where many Australians may never own a home.
A new Capital Markets report by Colliers says Australia is shifting toward what it calls a “rental-first” housing system, with vacancy rates below 2 per cent and six-figure price barriers preventing many first-home buyers from entering the market.
Colliers living residential head Robert Papaleo said investor confidence was being driven by structural undersupply and rising house prices keeping Australians in rental housing longer.
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“Investor confidence is driven by both the outlook for a continued structural undersupply of new housing to meet the needs of a growing population as well as more residents needing to rent for longer as house prices remain high and entry to ownership being constrained,” Mr Papaleo said.
He said vacancy below 2 per cent signalled “robust rental demand, price resilience and long-term occupancy stability”.
In effect, that means rental properties are full and competition remains tight, leaving little breathing room for tenants.
Mr Papaleo said more new households were renting for longer compared to previous generations due to financial constraints and high entry costs, with build-to-rent now embedded as part of Australia’s housing system.
Prospective buyers queue outside a Melbourne property inspection, as first-home buyers face growing deposit hurdles and intense competition. Picture: Flavio Brancaleone
Monash University senior lecturer in urban planning and design Katherine Sundermann said the shift toward renting appeared structural rather than cyclical.
“There is clear evidence that Australians are renting for longer,” Ms Sundermann said.
“We’re seeing lower levels of home ownership at the same stage of life compared to previous generations.”
Census data shows home ownership declined from about 70 per cent in 2006 to 67 per cent in 2021, with sharper falls among younger Australians.
“Home ownership remains a major driver of wealth accumulation in Australia,” Ms Sundermann said.
“A recent report suggested around 40 per cent of first-home buyers receive financial help from family.
Monash University senior lecturer Katherine Sundermann says home ownership rates among younger Australians have fallen compared to previous generations.
“That dynamic risks exacerbating inequality, as access to ownership increasingly depends on family wealth.”
Ms Sundermann said the private rental market remained unstable, particularly in Victoria, where average tenancy sits at about two years.
“That means many renters are moving frequently, sometimes every year,” she said.
By comparison, renters in Germany and Switzerland often remain in homes for eight to 12 years, providing greater stability for families and communities.
Mortgage broker Damian Medici says many first-home buyers are still determined to enter the market despite rising prices and lending constraints.
Margin Finance director Damian Medici said demand for home ownership remained strong despite increased institutional investment in rental housing.
“I would strongly disagree with the idea that people are simply resigning themselves to renting forever,” Mr Medici said.
“For many, it’s not a lifestyle choice, it’s a financial constraint.”
Mr Medici said buyers faced a combination of deposit hurdles, tighter serviceability tests and rising house prices that were outpacing savings.
Couples increasingly rely on family support to enter the housing market, with a significant portion of first-home buyers receiving some form of financial assistance. Picture: Liam Kidston
He estimated around 20 per cent of his clients he worked with received parental assistance through guarantor arrangements or gifted deposits.
Without that backing Mr Medici many aspiring first-home buyers were struggling to compete in a market shaped by constrained supply and persistent rental demand.
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