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5% increase by Christmas: Experts flag further rent hikes

·3-min read
For lease and money
There are more rent hikes to come, many experts say. (Source: Getty)

The average rent has already surged 12 per cent in 12 months across the capital cities and now several experts expect further rises of 5 per cent or more by Christmas.

The latest Domain Rental Report showed house and unit rents across the combined capitals reached a new record high of $515 and $460 respectively, with the country seeing its strongest annual growth in 14 years.

A collection of economists and property experts - surveyed by Finder every month - anticipated more pain to come, with more than half predicting a 5 per cent or more rise by the end of the year.

Eight in 13 expected to see a surge this large in Sydney, with eight in 12 forecasting the same in Melbourne.

Six in 12 tipped at least a 5 per cent rise in Brisbane, with six in 11 believing rents would rise this much in Adelaide and Perth.

Dr Nicola Powell, Domain’s chief of economics and research, said a combination of factors were pushing up rental prices.

“The numbers that we’re seeing are a result of a combination of high purchasing prices locking people into the rental market longer, increased home loan costs being passed onto tenants, weaker investment activity throughout 2019-20, fewer building completions, greater household formation, investors cashing in on the recent price boom, and rental demand being boosted by the return of international students and overseas migration,” Powell said.

With millions of Australian renters already experiencing rental stress - spending 30 per cent of household income on housing - Finder head of consumer research Graham Cooke said the outlook was concerning.

A whopping 40 per cent of Aussie renters said they struggled to pay their rent in June and July, according to Finder’s Consumer Sentiment Tracker - up from 32 per cent the same time last year.

“We’re hearing stories of applicants offering hundreds of dollars more per week than the asking price just so they have somewhere to live,” Cooke said.

“If you can’t afford your rent, reach out to your property manager and see if you can come to an agreement with your landlord.”

There have been some hopeful signs for renters, however.

Powell said vacancy rates were stabalising in most capital cities, which would mean a little less competition in the market.

“While it is still a very competitive market, increased investment activity has helped to ease some pressure on tenants, with national vacancy rates holding for the fourth month and the choice of rentals nudging higher over June,” she said.

“This, together with new first home buyer government incentives - such as Help to Buy - has the potential to assist the transition of more tenants becoming homeowners, easing some of the demand pressures that the rental market is currently facing.”

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