Rents to rise by 50 per cent
4th April 2008
RENTS in major cities will rise by 50 per cent over the next four years, a new report predicts.
Most major cities had seen double-digit percentage rises in house rents over the past year, as advertised listings dropped to a five-year low, Australian Property Monitors (APM) said in its March quarter rental series.
"Expect conditions for renters to worsen, as APM forecasts a 50 per cent rise in rents in most capital cities over the next four years," it said.
APM general manager Michael McNamara says rental supply is tight as a drum.
"As Gen Y leaves home and strong migration patterns take effect, our construction sector struggles to keep up the supply of well-located, affordable property to accommodate a growing population of renters," Mr McNamara said.
He said given the lag from approval to completion in building construction, the flow-on effects are likely to continue throughout the rest of this decade and beyond.
"This is not good news for renters ... we advise renters to lock in their current arrangements for as long as they can," he said.
He said many would-be homeowners continue to be deterred from purchasing through a combination of high mortgage rates and deteriorating affordability.
More than half the nation's renters believe they will never be able to afford their own home, with most blaming high interest rates.
An AAMI survey found that 33 per cent of Australians rent their home compared to 67 per cent who have a mortgage or own their home outright.
The nationwide survey of 2,501 respondents, for insurer AAMI, found 52 per cent of renters feel the dream of home ownership will never be affordable, although 39 per cent say they are happy to rent and have no plans to be saddled with a mortgage.
Melbourne saw the biggest rental increases over the 12 months to March, with a 17 per cent increase in house rents, and a 15 per cent rise in unit rents - to a median $350 and $300 per week, respectively.
The most expensive place to rent a house is Darwin at a median $420 a week after an 11 per cent increase over the past 12 months, followed by Canberra at $410 per week following an eight per cent annual increase.
Canberra also suffers the highest unit rents at a median $390 per week after an eight per cent increase over the past year.
The country's most populous city, Sydney, saw an 11 per cent annual rent rise to a median $390 per week for a house, and a 10 per cent increase in unit rents to $385 per week.
And as rents rise across the country, many tenants opt to sacrifice their home contents insurance to be able to make the rent, AAMI's public affairs manager Geoff Hughes said.
"Renters are increasingly looking for ways to save money to afford higher rents, which is forcing many to cut discretionary spending on insurance," he said.
Just 57 per cent of renters have home contents insurance compared with 98 per cent of homeowners, and only 47 per cent of renters have bothered to update their contents insurance in the last five years.