From bad to worse: Australian rents hit new highs
Australia’s rental crisis has hit another record, as tenants complain of up to 22 per cent rise in weekly payments.
Domain on Thursday revealed, across Australian capital cities, median weekly rent payments are $515 for a house and $460 for a unit.
That’s an increase from $460 and $410 respectively at the same time last year.
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The lack of supply in the market has contributed to rising rents, along with successive rate hikes by the Reserve Bank of Australia.
The tenant bears the costs.
In this week’s Reddit thread, tenants said they had been hit by increases of more than 20 percent in some cases.
Someone said while they expected rents to increase, they were surprised when it jumped from $220 per week to $270 – a 22 percent increase.
Others say their rents have gone up from $620 per week to $680 – but they are pragmatic about those increases.
“To be honest I’m glad I got a rent increase on the first rate hike,” said the user.
“They can’t do it again for another 12 months.”
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So, what happens if your rent increases in recent months?
States and territories each have their own rules when it comes to rent laws and how often landlords can raise rents.
In Queensland and Western Australia, in most cases, landlords can only increase rents every six months and must provide 60 days’ notice.
In Victoria, NSW, South Australia, Tasmania and the ACT, landlords can increase rents every 12 months and must also provide approximately two months’ notice.
In the Northern Territory, landlords can increase their rent every six months and only need to give 30 days’ notice.
Tenant advocacy groups and industry experts told 7NEWS.com.au that there was nothing stopping landlords from passing on the rising cost of mortgage payments to tenants.
“Owners may increase rents due to rising interest rates, however, they must be prepared for tenants to push back if it is not guaranteed or is excessive,” property management agency: Head of Distinct customer experience Shannyn Laird says.
“The owner can also increase the rent if the rent is periodic (meaning it is not fixed) and the tenant has not experienced an increase in rent within a certain period of time.”
He said tenants without fixed term leases should be prepared for a rent increase notice, if they don’t already have one.
“Be prepared for potential reach from agents or owners as costs increase so you are prepared and up front,” says Laird.
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The RBA has increased interest rates three times to 1.35 percent, up from a record low of 0.1 percent.
For someone with a 30-year, $600,000 mortgage, that would mean a modest $400 increase in monthly payments.
University of Sydney Henry Halloran Trust researcher Cameron Murray told 7NEWS.com.au it was “a common idea that higher interest rates would cause owners to raise rents”.
“And, of course, they could try it,” he said.
However, he continued, the market is largely driven by demand.
“You have to remember that, at the end of the day, rental prices are determined by the rental market and not by fees to landlords,” he said.
“We know that because most landlords don’t have large mortgages, most landlords make a lot of money and only a few recent buyers may have high mortgages.”
If the rental market were shaped by costs to owners, negative gear would not exist.
“Leases are not determined by the cost of owning the property and, if they were, the negative gearing wouldn’t exist because you can always raise the rent to recover your costs,” says Murray.
Negative gearing is effectively a tax offset that closes the gap between how much an owner’s investment property costs and how much they can make from it.
The Australian Tax Office defines a rental property as “negatively trending” if the deductible costs to the owner are greater than the income earned from the property.
Therefore, said Murray, supply and demand will be the main drivers of rental costs.
Unfortunately for tenants, it also benefits landlords.
Domain’s quarterly report finds affordability pressures from renting homes are shifting demand to units.
Head of research and domain economics Dr Nicola Powell said the figures were a combination of a number of factors.
They include high purchase prices that lock people into the rental market for longer, increased costs of continuing home loans, fewer building completions, and investors cashing in on recent price spikes.
“While this is still a very competitive market, increased investment activity has helped ease pressure on tenants with the national vacancy rate persisting for a fourth month and rental options pushing higher during June,” Powell said.
“This, together with new first home buyer government incentives such as ‘Help to Buy’, could potentially help transition more tenants into homeowners, easing some of the demand pressures facing the rental market today.”
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