Yahoo Finance Landlords' 'impossible' reality as record rents defended
The average renter now faces a $31,252 bill to keep a roof over their heads.
A landlord has defended skyrocketing rent increases, as median prices surpass $600 per week across the country.
Median rental prices have jumped 8.3 per cent annually, new CoreLogic data has found, with the average renter now facing a $31,252 a year bill to keep a roof over their heads.
The rental market is particularly tough for Sydney residents, who face the most expensive rents at $745 per week on average. This rises to $1,046 per week for the eastern suburbs and $1,167 per week for the northern beaches.
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Property Owners’ Association of NSW vice-president Debra Beck-Mewing said the rental increases were justified, given landlords were being slugged with higher property costs, including higher interest rates, increased costs to maintain properties, and increased council rates and land tax.
“All those sorts of things are putting landlords or property owners under pressure. So they have to recoup their costs,” Beck-Mewing told Yahoo Finance.
“A lot of them are still recovering from the dip in rents that happened in the 2021 period during the COVID lockdowns, when rents went through the floor and landlords had to cover it with their savings.”
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Beck-Mewing, who is a landlord herself, said tight supply was allowing some landlords to recoup more of their costs, but she said many landlords were actually going backwards.
“It’s impossible almost to get a cashflow-positive purchase,” she said. “There will always be a gap that landlords have to cover.
“More and more landlords are withdrawing their properties from the market because there are more restrictions on them and maintenance costs are going up, so it is a vicious cycle.”
What is the median rent in Australia?
Here’s a snapshot of Australia’s current weekly rental costs and annual price changes:
Sydney: $745, up 10.2%
Melbourne: $565, up 11.1%
Brisbane: $627, up 8.2%
Adelaide: $565, up 7.7%
Perth: $630, up 13.4%
Hobart: $535, down 3.5%
Darwin: $611, up 3%
Canberra: $651, down 1.9%
How did we get here?
CoreLogic head of research Eliza Owen said there were several factors contributing to the “unusually large rent rises” facing tenants, including fewer people living in share houses, a rapid population increase as international borders opened back up after the pandemic, and a “temporary shock” to investment housing due to interest rate hikes.
“Longer-term factors have also increased demand for rentals,” Owen said. “The reduction in social housing supply as a portion of all dwellings over the decades has placed more pressure on the private rental market, as has a declining rate of home ownership.”
Average household size has also been gradually declining over decades, with more people living alone.
“Rent value increases have broadly outpaced wage and income rises at the national level, meaning rental affordability has also deteriorated,” Owen said.
The average household now needs to spend 31 per cent of its income to pay the median rent - that’s up from 26.7 per cent in March 2020.
Will rents ease?
While annual rent growth is higher than historic averages, it has started to broadly slow. Owen said she expected rent growth would continue slowing this year, thanks to an increase in investment lending, normalisation of overseas migration and a potential cash rate cut.
Beck-Mewing is calling on the government to help stimulate housing supply, saying landlords could be “part of the solution to providing a more cost-effective rental market”.
“They should be encouraged into the market so there is more variety of supply,” she said. “We want to see tenants being able to choose where they want to live and for them to be able to have an affordable rental position.”
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