High rental increases hit Australians

[Belle]

Good news for investors, for a change, according to the latest figures (available under a pay-wall at The Oz). Rents have "hiked" (yes, the true meaning of that word rather than the hyperbole used by the media to describe miniscule, progressive interest rate rises) all across Australia. Covid has had a lot to do with it; people are escaping from the major cities and moving to the regional areas where they can work from home and have a better quality of life. There's a housing shortage in the major cities (so glad we've put a temporary stop to immigration) and investors are also abandoning long-term renters in favour of short term holidaymakers/visitors; ergo, AirB&B. (You just wouldn't want to live in an apartment building these days!!) This has been a sudden and radical shift. In our area alone there's been a 22% increase in rents over the last couple of years. Some areas elsewhere have increased as high as 50%. My sister rented out her modest, Federation-style 3b/r home on the Sydney lower North Shore last year for $1200 per week. (It came with 'livestock' in the form of cockroaches!!) If you had at least 3 people renting this house it would have cost them $400 per week each. That would be possible, so it's likely that there are multiple tenants for each dwelling now and this makes it unpalatable for investors. (Reminiscent of that 1943 film "The More the Merrier"!)

Our laws in Australia favour the tenant rather than the landlord and it's often very very difficult removing bad tenants. Naturally, this was always going to have consequences for the market. And the very small bond which is set for tenants wouldn't even cover the cost of a cracked kitchen counter, just as one example. Until all these things are fixed the situation of high rents will remain. Just as in our area, the adult offspring remain at home - sometimes into their 30s. If it works for you, keep doing it!!

The local builder has said that they're not seeing First Home Builders in the market now and this will influence rentals. This changed quickly with just a few bases point increases in interest rates. Sydney has amongst the very highest property prices in the world and its rents aren't far behind. There are still some places where you can get a 2-3br apartment for $475-$500 p/w but these involve 45 minute train rides into the city. Nobody wants that 'inconvenience' anymore (we did it ourselves, without a second thought, for years).

So the younger generation is all at sea when it comes to housing in Australia. I remember this same conversation about home ownership 20 years ago with my now 43y/o son!! Like him, they will have to be creative, hard-working and renovate a first home in an area which might require significant travel time, if they want to live in Sydney or Melbourne (who would!!!??). But resilience and flexibility aren't characteristics to be found in abundance in the younger generation!!

They still have their woke pieties, so all is not lost.