It’s not just Aussie property prices for first-time buyers which are under the microscope, renters are also getting a raw deal if they live in one of the nation’s most unaffordable suburbs, and its only set to get worse.

In current market conditions, low-income households typically need to spent 50-85% of their income on rent, according to the latest Rental Affordability Index (RAI) data.

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It is generally accepted that a household is in housing stress if it pays more than 30 per cent of its income on rent, which means that many rental households are at risk of falling into poverty and are being pushed into suburban fringes due to high rents.

Depending on the RAI, suburbs have been grouped into one of seven categories: very affordable (200 or above), affordable (150-200), acceptable (120-150), moderately unaffordable (100-120), unaffordable (80-100), severely unaffordable (50-80) and extremely unaffordable (50 or less) depending on what percentage of income is required to be spent on rent.

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Households paying 30% of income have an RAI score of 100, 38% of income have a score of 80 RAI or less, down to an RAI lower than 50 which means households are spending more than 60% of income on rent.

Moderately unaffordable, unaffordable and severely unaffordable cover the majority of the nation’s high-density suburbs while, unsurprisingly, Australia’s largest city is home to all 14 of the Aussie suburbs deemed extremely unaffordable.

Australia’s 14 ‘extremely unaffordable’ suburbs

Postcode Suburb 2000 Sydney city 2009 Pyrmont 2010 Darlingburst, Surry Hills 2021 Paddington, Centenntial Park 2022 Bondi Junction, Queens Pak 2023 Belllevue Hill 2025 Woollahra 2026 Bondi, Bondi Beach 2027 Darling Point, Edgecliff, Point Piper 2029 Rose Bay 2034 Coogee 2061 Kirribilli, Milsons Point 2088 Mosman 2095 Manly

SGS Economics & Planning associate Ellen Witte said the percentage of households renting has grown to 35 per cent across Australia, with many struggling to make ends meet and cover other essential living costs like transport, food and utility expenses.

“Single income households are the worst off and the trend over the last five years has mostly seen no improvement, except in Perth, where the mining downturn is likely to have taken the heat out of rents,” she said.

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“Historical trends between 1996 and 2011 show that rental affordability has deteriorated dramatically across all of NSW and Queensland since the early 2000s. The decline in rental affordability is expected to follow similar trends in other states.”

“Long-term trends in most cities present a pessimistic outlook for rental affordability. More young Australians are being squeezed out of the owner-occupier property market due to high housing costs, and this is driving up demand and prices for rental accommodation, exacerbating the rental accommodation shortage,” Witte said.

City-by-city breakdown

Capital city data (excluding Melbourne) breaks down the areas the low income households will continue to experience severe unaffordability.

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Sydney

Greater Sydney is the least affordable metropolitan area in Australia in recent years, with a RAI of 109 in the last two quarters of 2015.

However, affordability levels have stabilised in Sydney in recent years.

Near the city centre, there has been no relief for the average household in meeting housing costs, though some areas in the west have experienced slight improvements in affordability.

Brisbane

With a RAI of 116, rental affordability in Greater Brisbane has decreased over the past two years; it is the only city to have recorded such a trend of the metro areas studied.

This is due to a declining income growth rate in Brisbane. Over the past two years, household income has declined by 0.2 per cent, while rents have increased overall by 2.5 per cent.

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Median household rents have fluctuated between $390 and $406 per week.

Some areas in the inner city, south of the Brisbane River (i.e. West End, South Brisbane and East Brisbane) have experienced improvements in rental affordability, probably as a result of localised growth in apartment supply.

Perth

Greater Perth has a RAI of 126, meaning rents are acceptable.

With a score of 108 (moderately unaffordable) in December 2013, affordability has increased significantly over the past two years.

The increase in affordability has been more significant in regional WA compared to the metro area, away from moderately unaffordable rents to acceptable rents, possibly in part due to the mining downturn.

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