Higher rents push tenants further from home ownership

Last year, tenants reaped the benefit of falling rental prices. But those days are long gone, and price rises appear to be here to stay.

Across the board tenants are forking out an extra $30 a week in rent compared with last year, dashing away dreams of saving for the elusive first-time deposit. Based on Allhomes’ rental data over the first nine months of the year, tenants were paying a median price of $485 for a house and $455 for a unit. This is an additional $1560 in rent payments across the year, moving tenants further away from home ownership.

However, unit approval rates are at a high. The record approval rate was set in 2011, when 2165 units were approved for development. As the market became swamped in stock from this wave of developments, the median price was forced down. However, this year the level of rental listings has shrunk, perhaps as a result of tighter lending conditions to investors.

For example, over September, 1052 properties were listed on allhomes.com.au, a decline of 14.1 per cent compared with last year (or 173 fewer properties). This decline has been happening over the entire year, tightening rental market conditions and forcing tenants to compete for a smaller pool of stock.

Tenant activity did slide annually over September but this is likely due to the consecutive long weekends falling slightly earlier than last year, both hampering activity over September. Demand has eased over the year to date, but not to the same extent as supply. During the first nine months of the year just over 1000 fewer properties were leased compared with the same period last year. There were almost 2000 fewer properties listed over the same period.

The latest Australian Bureau of Statistics figures show unit approvals over the year to date are sitting at the second highest rate on record. As this stock comes on to the market it will have a negative effect on both unit sale and rental prices. It could particularly affect the value of older units, as tenants desire the modern conveniences of a newer build. Respite is in sight, and as this stock comes onto the market, prices are likely to start to ease.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell. The MIX106.3 Real Estate Show, Saturdays, 9am-10am.