The rise of the lifetime renter

Scott Kuru November 28, 2024 4 min read

Image from NCA NewsWire/Jeremy Piper

KEY POINTS

New research shows the number of Australians who rent is growing across almost all age cohorts
The paper for the Australian Housing and Urban Research Institute documents the rise of “forever” or “lifetime” renters
The research clearly shows how much extra tenants are willing to pay each week for certainty around leases, rent increases and property maintenance—key insight for property investors and landlords

A fascinating new study from the nation’s leading independent housing institute shows the number of Australians renting is growing across almost all age cohorts.

The research for the Australian Housing and Urban Research Institute - AHURI - confirms that while a majority of tenants (78%) aspire to home ownership, only around 17% are actually confident that they will achieve it.

The academics who penned the paper say this points to the rise of the “lifetime” or “forever” renters in Australia.

They say that “rentvesting” - where tenants buy a property where they can afford and rent where they want to live - is on the rise.

The findings are important for landlords and property investors, as they also show that many tenants are willing to pay more to lock in longer leases without sudden rent rises, property maintenance that’s above minimum standards and the ability to extend leases indefinitely.

The details

The researchers behind the AHURI study point to several changes in the way the rental market in Australia has evolved.

Firstly, there are now more people renting.

In fact, the authors say they believe there are now more Australians who rent than people who own their homes outright without a mortgage.

“We think we've probably flipped from being a nation of homeowners and mortgage holders to being a nation of mortgage holders and renters,” says lead researcher Professor Emma Baker from The University of Adelaide.

“So it's not just a change in the structure of where we live; it's quite a big change for Australian society, and it changes the way that we need to think about the rental sector.”

Secondly, Professor Baker and her team say the profile of the Australian renter is changing.

“Whereas once private rental was seen largely as a tenure of transition in the early life stages on a journey to home ownership, renting now has a much more mainstream age profile,” they say in their report “Planning for a two-tenure future”.

“Renters are older, and elderly people are increasingly likely to rent.”

The authors say the large cost of home ownership in Australia is the single biggest deterrent for renters, with almost 60% not confident that they will ever be able to afford to buy a home.

“Do not have enough for a deposit” or “can’t afford to buy something appropriate” dwarf other reasons such as “prefer renting”, “can’t find anything suitable to buy”, “changes in personal relationships”, and “vocation-related”.

“It also means for many Australians, and many young Australians, particularly, that they're preparing to be lifetime renters,“ Professor Baker says.

Premium on certainty

In findings that landlords and property investors should note, the researchers show that many tenants will pay a large premium for certainty.

“Renters are keen for protections that will allow them to extend their lease indefinitely, have limits on the size of rent increases and have good quality housing, and they are willing to pay for these types of protections,” the authors say.

They were even able to put a dollar figure on how much extra tenants were willing to pay.

“For example, the analysis suggests that current renters are willing to pay $127 in addition to their weekly rent to have a home that is above minimum standard,” they conclude.

While the willingness of renters to pay a large premium for certainty may be surprising, Professor Emma Baker says she thinks that “we shouldn't really interpret this as rental affordability not being a problem in Australia.

“What this gives us is a much more refined look inside the experience of renting”, and “it shows us that what renters value most and what they aren't getting are some of these things about having homes of a reasonable standard, a bit of protection from scary rent rises, where CPI rises are okay, and they also want a little more security of tenure.”

The rise of the “Rentvestor”

The authors say their analysis suggests a growing trend towards ‘strategic renting’, “whereby a growing number of people appear to be choosing to rent to take advantage of the flexibility it may provide.

“While not a completely new trend, its prevalence appears to be increasing and expanding as more people participate in ‘rentvesting’ – that is, renting while also investing elsewhere in the property market.”

Lead researcher Professor Emma Baker says that the rise of rentvesting “shows that often young people or people, in general, are being quite strategic in a difficult housing market.

“Rentvestors are probably a group in Australia that in the 1980s would have just shuffled straight into homeownership, but they're having to be more strategic in the market.

“They might buy in a more affordable housing market, say, Adelaide, while they're renting and working in Melbourne, so they've got a foot on the housing ladder.”