Surging rents put state top of nation
17 May 2008
MELBOURNE has topped the nation for the steepest rise in rents for houses and units over the past year. It underlines the city's rental crisis, placing further pressure on governments to increase the supply. And the situation could get worse. About 1500 people a week are expected to move to Melbourne, with experts predicting the population will hit 6.2 million by 2020 — a decade earlier than forecast a few years ago.
The poor investment climate is also reducing the availability of new homes as investors seek higher returns elsewhere.
Research by Residex shows that for the year to April the median weekly rent for a house in Melbourne increased by 22.95% to $375, eclipsing all other capital cities. Sydney recorded a 19.05% rise in rents.
Rent for a typical house in Perth lifted 18.64%, and in Brisbane the increase was 6.25%.
It was the same story for units. Melbourne posted the biggest gain for the period, with the median rent racing 18.52% higher to $320. In Sydney the weekly rent for a unit rose 9.46% to $405.
John Lindeman, chief property analyst at Residex, said Melbourne's population was growing at a faster rate than the national average, with those locked out of the housing market forced to rent, driving up prices. "And it could get worse for that reason," Mr Lindeman said. "Combine that with new arrivals into the city, and I think that will drive up rents."
The jump in rents could prove a vicious circle for home-owners. Rents are a major component of the consumer price index and were partly responsible for a break-out in inflation this year, which forced the Reserve Bank to push up interest rates.
This week's federal budget tried to tackle the rental and housing affordability crisis, with Treasurer Wayne Swan unveiling a $2.2 billion housing package, including $623 million set aside for the new National Rental Affordability Scheme, which the Government said would create up to 50,000 rental properties.
A recent survey by the Real Estate Institute of Victoria showed the vacancy rate across Melbourne had dived to 0.9%, the worst since records began in the early 1980s.
In March only 131 new public housing developments were approved by local councils across Australia, down from the average of more than 300 and the lowest result in 30 years.
Savanth Sebastian, an equities economist at CommSec, said Australia's population was growing at its fastest pace in 18 years, which combined with a slump in new housing to drive up rents.
Higher input costs and state and federal taxes were keeping property developers out of the market.
For the March quarter, Melbourne house prices recorded their biggest fall since 1993. According to the REIV, the median price for a detached home in Melbourne in the March quarter was $432,500, a fall of 8.4% from the December quarter median of $472,250.