Rent price rises at 20-year high!

[Property Dude]

Rent price rises at 20-year high

By Milanda Rout
The Australian
January 29, 2009 12:00am

* Interest rates being slashed
* Landlords putting squeeze on tenants
* Rudd's plan to boost rental affordability

RENTS have recorded their highest increase since 1988 amid fears the rental crisis will only get worse as the impact of the global recession takes hold.

Latest figures from the Australian Bureau of Statistics show the annual rate of growth in rents across the country has jumped to 8.4 per cent in the year to last month, up 2 per cent from 2007, The Australian reported.

The statistics also reveal the increase in rents has jumped from 5.4 per cent to 8 per cent in Sydney, 11.2 per cent to 12.2 per cent in Perth and 8.6 per cent to 10.1 per cent in Brisbane.

Adelaide also recorded an increase in residential rental growth of 4.7 per cent to 5.4 per cent and Melbourne jumped to 6.6 per cent from 5.4 per cent.

BIS Shrapnel senior economist Jason Anderson said the rental market was only going to get worse as the country's economy faced a possible recession.

More: http://www.news.com.au/business/money/story/0,28323,24977706-462,00.html

This will mean a better yield for residential property investors. Question is, is it sustainable? Will it drive more people into the property market as owner occupiers? Is there a housing crisis in Australia? If so, will it continue and, if it does, what impact will this have on both property prices and rents?

Your thoughts?

[2BAD4U]

Personally I believe that as rents go up and interest rates come down the benefits to switch from renting to buying become too good to ignore. I say be prepared for vacancy rates to increase and rents to be flat to falling in a couple of years time.

What would you pay $300k loan at 5.5% = $400 / wk or Rent of $350 / wk minimum. That extra $50 is going towards YOUR asset not someone elses.

[barry2007]

Hi guys,

It's getting a little harder to get loans these days so unless potentual buyer's have a good deposit and savings history they may find themselves renting for quite sometime yet. Not being greedy myself I think if by the end of the year rates have continued to fall to all time lows( Mid year I'm looking at locking in for a long time )then perhaps I wont have a need to raise rents on contract renewals at the end of this year/start next). I would rather not raise and keep my current long term tennants and if there is no need than I wont.

Cheers,

[Gav23]

I agree with Barry, loans are becoming harder to get. I'm a FHB and the hoops I've had to jump through for my pre-approved loan are unbelievable. I have a good work history (mainly government jobs), proven savings history, I've paid out loans in the passed (2 x car), I have a 20% deposit, good credit history, and I do not own a credit card. I have a government job, and earn above average wage.

Out of the 3 institutions my broker has recommended for my situation, 2 verbally turned me away, before I even filled in an application. I have an application in for the other one, should find out next week. The reason given for being turned down so far is that I have not been in my current job for more than 12 months. I had a letter from my boss stating I'm not on probation, my position is very sought after, and there is a shortage of people with the skill set required to do my job.

Only 18 months ago, my brother got a 100% loan, with no savings history (apart from paying rent), has numerous "24 month interest free" items in his house, and no real job security (he is a contracted tradie).

[kincella]

hmmm...have you tried any direct for eg...cba.....you may think its jumping through hoops...not much different to applying for a job ????
wonder who the broker sent it to ??? sounds ok to me

[Gav23]

hmmm...have you tried any direct for eg...cba.....you may think its jumping through hoops...not much different to applying for a job ????
wonder who the broker sent it to ??? sounds ok to me

Colonial (owned by CBA) are the only one of three considering it (i also bank with CBA). ING said no, and I cannot remember the other off the top of my head.

[gfresh]

How much were you considering borrowing?

I think it will become even harder as the economy gets worse. The risk adjustment in their calculations will get quite tough. Most of my friends bought with 5% down and next to no savings history, I think it was quite common for FHB's up until the end of last year.

In the median-term if nobody can get loans, the only solution is borrowing less, resulting in nobody being able to bid current prices asked, and prices coming down.

I have to wait until at least March until getting finance approved (term deposit matures then).. it's possible the lending market will have turned against me in that time :(

[Gav23]

How much were you considering borrowing?


Less than 4 x my annual wage (actually, less than 3 x if you consider my other income stream)

I am also put an offer in writing for one of the places, and the RE is dicking me around...

(Sorry, off topic...)

[Ricky Roma]

I think you can get ready to see a big drop in Sydney rents... I am seen the top end pull back substanially, the level of enquiry for rents $750+ has disappeared compared to 12 months ago... Low end rentals remains strong as many of these are uni students, os students and people who would not normally buy anyway... I think the big pull back is from executives, bankers, corporate tenancies etc.... Watch for a swift decrease in high end rental prices over next 3-6 months...

[ripley]

Alot depends on the unemployment picture.

If people lose their jobs more and more, rents will surely flatten out and vacancy rates will rise.

the peculiar thing about our property markets is that

1. there's a shortage of supply - if housing prices are high rental rates should be high, and if housing prices are low, rental rates go lower b/c people become owner occupiers. So rental rates will continually be high regardless of the unemployment/economy picture and

2. Rudd is artificially propping up housing prices even more with intervention/stimulus.

With interest rates this low, we should be seeing more owner-occupiers which means rental rates decreasing ... however this is not clear cut given current government intervention.