Housing rents surge in Sydney

RENTS for houses across Sydney surged 8 per cent in the three months to June, driven by landlords facing higher mortgage rates.

And while landlords were trying to recoup increased costs, the same high interest rates have been deterring renters from shifting to home ownership.

The 8 per cent rent increase for houses, to a weekly median of $420, was the highest of any capital city during the June quarter, according to Australian Property Monitors. It ranks as Sydney's highest recorded quarterly growth since records were first kept in 2002, and was well up on the 1 per cent growth in the first quarter of this year.

With intense competition for accommodation, house rents have risen 15 per cent in the past year in Sydney. Melbourne and Perth recorded 17 per cent annual growth, and Darwin's 15 per cent rental growth made its $450 a week median the priciest in the country.

The Sydney unit rental market has been more subdued, with a 4 per cent jump during the June quarter to a median $400 weekly rent, reflecting an 11 per cent jump for the past year.

"The combination of generation Y leaving home, strong migration patterns and a weak building sector is intensifying demand," said Michael McNamara, a spokesman for Australian Property Monitors. "The shortage of affordable accommodation will no doubt add to the growing number of displaced renters who cannot afford to live in well-located areas.

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Housing rents surge in Sydney - National - smh.com.au

 

I think that would be pretty much the same Australia wide at the moment

 

Do rents ever go backwards as interest rates come down?

 

Thanks Sim. We are very close to buying an investment property in Hobart (northern burbs) The rents have gone up fairly heavily in line with rate rises here. Previously I think the rents were relatively flat.

 

Interestingly, in the latest Residex report (end June 08) it's far more tenants who are suffering stress than home owners. 39% of renters compared to 16% of home buyers are experiencing stress, and the proportion of renters in housing stress is likely to increase more than purchasers. (Source: Residex)

Because renting is still far cheaper than carrying the burden of a mortgage (particularly with our current high rate time in the cycle) there are more buyers adopting the "wait and see" approach and taking the higher rents on the chin.
However, as John Edwards points out in his report, there is a hidden trap for tenants, as generally one's % of household costs towards housing loans decreases for home owners over time, yet tenants need to continue to pay current market rent, with the percentage of their household income swallowed up by housing costs not reducing like a mortgage.
The no. of stressed households that are renters are certainly set to increase as investors recoup the higher cost of their borrowings and demand for housing continues to climb. Edwards believes that we are witnessing the beginning of what is likely to be the return of positive gearing, with vast numbers of our Australian population permanently opting or being forced out of the great Aussie dream- home ownership.