Gen Y city tastes push up rents
4th October 2007
SYDNEY landlords are asking new tenants to pay an average of $400 a week for a house, up from $350 last year.
The median weekly rent for a unit has gone up 12 per cent, from $340 to $380, says the Australian Property Monitors rental report for the September quarter.
Inner urban rent had gone up most. The report's author, Michael McNamara, blames generation Y's taste for city living rather than buying in what they see as the cultural wasteland of the suburbs.
He said all capital cities had seen dramatic rises in rents, especially over the past 12 months.
"We have seen a period with rising interest rates and unaffordable housing," he said.
"This means many would-be home owners out there will have delayed their decision making - some indefinitely - to buy a property and would rather rent. I think for the first time we are going to see a generation where a great many of them will be content to be lifetime renters.
"Maybe this marks the slow death of the great Australian dream."
Mr McNamara pointed out that the report shows only "asking rents", the rent a landlord may seek after the old tenant moves out.
Landlords frequently see a change in tenancy as a chance to raise the rent, so the figures do not reflect what most renters, who have stayed put over the course of the year, are paying.
The city has been hit hardest. The median weekly rent on a unit in Bondi Junction has gone from $400 to $430 in the past year, while a house has jumped from $620 to $700. A unit in Elizabeth Bay costs an average of $50 more a week than it did last year and a unit in Woolloomooloo costs an average of $100 more than the year before.
Rents in some inner-city suburbs have not moved or have dropped.
"The biggest change has been apartments very close to the city," Mr McNamara said. "It's the premium locations that have driven these rents."
He said generation Y was a significant factor. "For many of them, even though there's cheaper housing on the outskirts of our city, they would much rather pay exorbitant rents in the urban areas than countenance buying a home in what they consider the cultural wastelands of the suburbs."
Mr McNamara said generation Y - which he defined as anyone born after 1976 - was moving to a more European approach: "In Europe there isn't that same feeling that home ownership is some sort of sacred rite. It's perfectly acceptable to be a renter for life and use your money to buy other assets," he said.
Generation Y pushing up rents: report
4th October 2007
Weekly asking rents in all capital cities are at record highs, driven by the strong demand for inner city properties by those in their twenties, according to a report by Australian Property Monitors. "Now in their late 20s and leaving home, as this generation enters the rental market, expect them to keep pushing rental values upwards in our most sought after locations," general manager Michael McNamara said. "Generation Y (the name given for those in their twenties), for the most part, would rather pay exorbitant rent in inner city locations than live in what they see as the cultural wasteland of suburbia." During the 12 months to September, asking rents for Perth houses jumped 23 per cent, but slowed to just three per cent in the September quarter.
The asking rents for houses in Melbourne rose by 16 per cent to $330 per week while rents for units climbed 12 per cent to $290 per week in the year to September. During that 12 month period, asking rents for Sydney houses increased by 14 per cent to a record $400 per week while those for units rose by 12 per cent to $380 per week. There was some relief for Brisbane renters in the September quarter, when rents stabilised at $300 per week for units and $320 per week for houses. For the year to September, however, asking rents for Brisbane units rose by five per cent and jumped by 10 per cent for houses. At the same time, asking rents for houses in Adelaide, Darwin, Hobart and Newcastle grew by eight per cent. The report found Perth to be Australia's most over-valued market. In Perth, the rental income received relative to the value of an investment property was 3.4 per cent in the September quarter. "Whilst giving renters very little relief, increasing gross rental yields are expected to drive stronger property markets in the eastern capital cities, especially in apartment markets," Mr McNamara said. "Investors will see stronger investment fundamentals as a reason to prefer property as an asset class."