Article from the Australian Fiancial Review.
More pain ahead for renters nationwide
Mar 16
Robert Harley
In Perth, potential renters are bidding for houses. In Sydney, workers are moving into backpacker accommodation.
Across Australia, a rental crisis is growing - delivering better returns to investors but pain to hundreds of thousands of renters.
The federal opposition's spokesman on housing and urban development, Kim Carr, said that Australia had an acute shortage of housing stock, and both renters and buyers were suffering from some of the highest housing costs in the world.
With vacancy rates falling, rents rose in every capital city last year, according to Real Estate Market Facts, released yesterday by Mortgage Choice and the Real Estate Institute of Australia.
In Perth, where the number of empty rentals is at the lowest level for a decade, the median rent for a three-bedroom house increased by 21 per cent.
For two-bedroom units, the rises in median rent ranged from 3.4 per cent in Sydney to 29 per cent in Perth.
The vice-chairwoman of National Shelter, Mary Perkins, said the figures understated the extent of the crisis.
"There is less and less investment at the low- and middle-income end of the housing market so that people in this bracket are having a hard time finding affordable accommodation," she said.
"People are moving to cheaper areas, they are downscaling. At the bottom end of the market, they are going into temporary accommodation like caravan parks or 'lounge surfing' with friends."
Most expect the situation to worsen. An ANZ economist, Ange Montalti, yesterday warned of a looming chronic shortage in Australian housing stock.
In the latest ANZ Residential Snapshot, he warned that the current level of building activity, about 138,000 starts a year, could not meet the underlying demand of about 161,000 dwellings and "significant shortages are going to develop relatively quickly".
"With rental affordability at its lowest level on record, buyer affordability at difficult (albeit moderating) levels and subdued investor activity, it is little wonder tenant demand for rental properties is outstripping supply," Mr Montalti said.
He expects rental growth to accelerate in 2007 - a move that will improve returns to investors.
Macquarie Bank's head of property research, Rod Cornish, said rents would continue to rise. "They are rising because of very low supply in some cities," he said.
"Developers have not been able to get projects up and running and this is likely to be in place for the next few years."
Mr Cornish said that the shift would not have a sudden impact on prices because investors needed confirmation of a sustained pick-up before they made a return to the market.
Nevertheless, as vacancies tightened, and rentals began to rise, there was "less likelihood of investors selling property".
REIA deputy president Graham Joyce took the opportunity to remind politicians, bureaucrats and analysts not to tinker with negative gearing.
"This was tried in 1985 with such obvious and disastrous consequences for people trying to rent that negative gearing was reinstated in 1987," he said with an eye on the federal government's current international benchmark study of taxation.
"The notion of abolishing negative gearing or concessions to capital gains tax would be tantamount to sabotage of the rental market."
Developing a framework to meet the housing needs of the future. AFR Housing Congress in Sydney, March 30-31.
GarryK
More pain ahead for renters nationwide
Mar 16
Robert Harley
In Perth, potential renters are bidding for houses. In Sydney, workers are moving into backpacker accommodation.
Across Australia, a rental crisis is growing - delivering better returns to investors but pain to hundreds of thousands of renters.
The federal opposition's spokesman on housing and urban development, Kim Carr, said that Australia had an acute shortage of housing stock, and both renters and buyers were suffering from some of the highest housing costs in the world.
With vacancy rates falling, rents rose in every capital city last year, according to Real Estate Market Facts, released yesterday by Mortgage Choice and the Real Estate Institute of Australia.
In Perth, where the number of empty rentals is at the lowest level for a decade, the median rent for a three-bedroom house increased by 21 per cent.
For two-bedroom units, the rises in median rent ranged from 3.4 per cent in Sydney to 29 per cent in Perth.
The vice-chairwoman of National Shelter, Mary Perkins, said the figures understated the extent of the crisis.
"There is less and less investment at the low- and middle-income end of the housing market so that people in this bracket are having a hard time finding affordable accommodation," she said.
"People are moving to cheaper areas, they are downscaling. At the bottom end of the market, they are going into temporary accommodation like caravan parks or 'lounge surfing' with friends."
Most expect the situation to worsen. An ANZ economist, Ange Montalti, yesterday warned of a looming chronic shortage in Australian housing stock.
In the latest ANZ Residential Snapshot, he warned that the current level of building activity, about 138,000 starts a year, could not meet the underlying demand of about 161,000 dwellings and "significant shortages are going to develop relatively quickly".
"With rental affordability at its lowest level on record, buyer affordability at difficult (albeit moderating) levels and subdued investor activity, it is little wonder tenant demand for rental properties is outstripping supply," Mr Montalti said.
He expects rental growth to accelerate in 2007 - a move that will improve returns to investors.
Macquarie Bank's head of property research, Rod Cornish, said rents would continue to rise. "They are rising because of very low supply in some cities," he said.
"Developers have not been able to get projects up and running and this is likely to be in place for the next few years."
Mr Cornish said that the shift would not have a sudden impact on prices because investors needed confirmation of a sustained pick-up before they made a return to the market.
Nevertheless, as vacancies tightened, and rentals began to rise, there was "less likelihood of investors selling property".
REIA deputy president Graham Joyce took the opportunity to remind politicians, bureaucrats and analysts not to tinker with negative gearing.
"This was tried in 1985 with such obvious and disastrous consequences for people trying to rent that negative gearing was reinstated in 1987," he said with an eye on the federal government's current international benchmark study of taxation.
"The notion of abolishing negative gearing or concessions to capital gains tax would be tantamount to sabotage of the rental market."
Developing a framework to meet the housing needs of the future. AFR Housing Congress in Sydney, March 30-31.
GarryK
