Where are the renters?

[wylie]

In my experience, the people with spare bedrooms are not looking to rent them out, and would only do so if they themselves became desperate for funds.

Of course, if a family member was desperate, I would consider letting them stay, but the people I know with spare bedrooms would not be too keen on this either.

So, saying there are plenty of spare bedrooms doesn't mean they are "available" to renters or even available to family on a long term basis.

 

[HomeBuyerStrike]

So, saying there are plenty of spare bedrooms doesn't mean they are "available" to renters or even available to family on a long term basis.

I have friends who are living home with family while saving for a deposit. While these rooms may not be available on the open market, they are latent supply. I think it's unlikely that we would ever rent out our rooms but the option is always there. We also have a vacant unit in the family and more vacant space in the home of a family member.

 

[alexlee]

Jokes aside, I figure we have another 0.75-1.25% of this rates cycle still to run. I think you may be surprised at how people still manage to get by.

The effect of interest rates decreases with the length of ownership.

People who have owned for 25+ years have likely paid off the mortgage, so interest rates are irrelevant.

People who have owned for 12 years have likely paid off 1/3 of the mortgage, and their wages have doubled since they bought the place. So someone who owns a 600k property now might have bought the place 12 years ago for 300k when their salary was 60k. Now, the mortgage is 200k, and their salary is 120k. An increase of 1.5% in interest rates would be 3k. What's 3k extra payments to a person on 120k?

People who have recently bought are going to be stretched. They don't have much equity so they can't just sell, as the bank will come after if it's not enough. What's more likely is that they'll try to get by and cut their expenses to the bone. Unemployment obviously increases the risk of default, which is why 2007, for example, saw more repossessions in Sydney. But of course, a recession likely means rates will go down, helping those who still have jobs and mortgages. The unemployed will be vulnerable, but they always are whether rates are low or high.

The recent owners are the likeliest to rent out their rooms, but only because they need to. Even so, human behaviour being what it is, once you move into 'your' home, renting out rooms and sharing again will not be the first response to financial strife. More likely, they'll cut expenses, and most households have a lot of 'fat' to cut in their budgets.

 

[HomeBuyerStrike]

The recent owners are the likeliest to rent out their rooms, but only because they need to.

Why do you discount the possibility that young adult children will live in family homes while saving for a deposit? It's not there costs that are in play there, it's their childrens.

Even so, human behaviour being what it is, once you move into 'your' home, renting out rooms and sharing again will not be the first response to financial strife. More likely, they'll cut expenses, and most households have a lot of 'fat' to cut in their budgets.

I know plenty of recent homeowners who have no fat to cut in their outgoings.

 

[wylie]

I have friends who are living home with family while saving for a deposit. While these rooms may not be available on the open market, they are latent supply. I think it's unlikely that we would ever rent out our rooms but the option is always there. We also have a vacant unit in the family and more vacant space in the home of a family member.

This is my point..... but you are saying there are not only two options (rent or buy) and there are plenty of empty rooms available.

I just don't know anybody prepared to disrupt their nest in order to free up those empty rooms, unless they become desparate.

So..... are the empty bedrooms available..... or not??

I would say "not".

 

[alexlee]

I know plenty of recent homeowners who have no fat to cut in their outgoings.

Then they'll default. That happens when you overstretch and expect rates not to rise. The question is how many of them there are? Will enough people be affect by 1% rate rises to the point where they default that it'll crash the market? I have no idea.

 

[alexlee]

So..... are the empty bedrooms available..... or not??

There are plenty of physically empty bedrooms. Therefore, they are 'available' to be occupied / rented, in theory. In practice, probably not.

It's like saying there are plenty of empty car seats during morning commutes. It doesn't mean everyone will suddenly carpool.

 

[wylie]

There are plenty of empty bedrooms available in theory. In practice, probably not.

It's like saying there are plenty of empty car seats during morning commutes. It doesn't mean everyone will suddenly carpool.

Exactly!!!

 

[HomeBuyerStrike]

So..... are the empty bedrooms available..... or not??

I would say "not".

They are currently unavailable, if we changed our mind they would become available. When we finish our lease they will likely become available. So in the short term they are unavailable but in the medium term they will become available. There is also a vacant unit in the family as I mentioned that could be filled and there is also vacant space in a family home that could be filled. We're not interested in buying so our situation isn't probably that common. If we were of the mindset that many seem to be then we would be living in the vacant unit struggling to get onto the 'property ladder'.

 

[HomeBuyerStrike]

Then they'll default. That happens when you overstretch and expect rates not to rise. The question is how many of them there are? Will enough people be affect by 1% rate rises to the point where they default that it'll crash the market? I have no idea.

You're ignoring the possibility that they will opt to increase their incomings. The most obvious way to do this would be to make better use of the available space.
In fact it's possible that the government could introduce incentives to encourage this to support this group, although that would erode the demand side forces.

 

[dan c]

I have friends who are living home with family while saving for a deposit. While these rooms may not be available on the open market, they are latent supply. I think it's unlikely that we would ever rent out our rooms but the option is always there. We also have a vacant unit in the family and more vacant space in the home of a family member.

You seem to be arguing both sides of the street. The rooms are there, so there is no shortage, but the rooms will never likely be let, so there IS a supply issue. Family members living at home is not latent supply, it is adult kids living at home with mum and dad!

When the kids move out, will the parents say, a) Great the kids have moved out, now we can start generating income from their bedrooms, or b) Great, the kids have moved out, now I can convert a bedroom into a sewing room?

 

[HomeBuyerStrike]

It's like saying there are plenty of empty car seats during morning commutes. It doesn't mean everyone will suddenly carpool.

That's not really analogous. People's commuting needs are very specific and unique. They need to go from point A to point B. Public transport is a much more convenient alternative to driving. I don't believe people's housing needs are so specific.

 

[HomeBuyerStrike]

You seem to be arguing both sides of the street. The rooms are there, so there is no shortage, but the romms will never likely be let out, so there is a supply issue.

Where did I say that? I've said the rooms are not currently rented out. It's very possible that they will be rented out at some point in the future.

Family members living at home is not latent supply, it is adult kids living at home with mum and dad!

Of course family members living at home is not vacant supply, the space is occupied. It's where there is vacant space and family members move back home that the vacant supply becomes utilised.

 

[dan c]

While these rooms may not be available on the open market, they are latent supply. I think it's unlikely that we would ever rent out our rooms but the option is always there. .

The spare rooms are there, sure, but they will never likely be let, and the reasons for this are lifestyle reasons, not economic. Sure I could use another $150 bucks a week, but would I share my own house to get this extra cash? No I wouldn't.

And, would a tenant accept sharing with the landlord for a reduction in rent? It's not an attractive option for owner or tenant.

 

[HomeBuyerStrike]

The spare rooms are there, sure, but they will never likely be let, and the reasons for this are lifestyle reasons, not economic.

I've already stated that our situation is unique. We are renting space we don't need because we can afford it and we like the area and the property.

Among my peers I know of mortgagees looking to rent their spare rooms and I know of couples living with family while saving for deposits. I think for some their purchase may even be prefaced on renting out a room to help with rent, as has been stated before most are not savvy on the financials of the market.

 

[wylie]

I've already stated that our situation is unique.

Why is your situation unique? I also think you need to decide which way you want to argue. You ARE arguing two sides of the street.

 

[HomeBuyerStrike]

Why is your situation unique? I also think you need to decide which way you want to argue. You ARE arguing two sides of the street.

How am I arguing two sides of the street? I am saying we can afford to have extra space. I'm not bleating anywhere about a rental crisis or home affordability crisis. Our situation is unique. We are lifestyle renters who could afford to buy today if we wanted to with considerable equity and afford our mortgage no problem but we choose not too. If you're saying that we're part of a large demographic then you'd be entertaining the idea that investors have a massive problem on their hands.

 

[Aaron Sice]

Where did I say that? I've said the rooms are not currently rented out. It's very possible that they will be rented out at some point in the future.

variable. can't give conc stats with a possibility. can be 'latent' it's entire existence. maybe it's existence is solely to be latent...like a march fly. now there's an argument.

Of course family members living at home is not vacant supply, the space is occupied. It's where there is vacant space and family members move back home that the vacant supply becomes utilised.

so everyone's moving back home? please, entertain me with this reasoning, i'm about to make a morning coffee.

my god, you ARE arguing both sides of the coin

you are just chucking hypotheticals out there and expecting some kind of concrete reply.

you're a "last word in the argument" kinds person, huh?

well, i learned somethign from my FIL. very valuable piece of information - titled "how to get the last word in an argument".

the phrase?

easy......"yes, dear".

and that's what i'm saying here, because clearly you have very little grasp of modern day life, your arguments are irrational and you're becoming a borderline troll.

asking ahypothetical is one thing, expecting a concrete reply and arguing until you're blue in the face that your hypothetical will actually eventuate and accepting no other ideas as possibilities is called "being a troll".

even ex perma-bulls like myself have taken a dose of salts, and i'm pretty f_ing opinionated.

talk about can+worms. every thread you post in becomes an insane amount of banter.

 

[Aaron Sice]

Our situation is unique. We are lifestyle renters who could afford to buy today if we wanted to with considerable equity and afford our mortgage no problem but we choose not too.

but in another post you said Australia WASN'T different....? which one is it?

man, i give up.

'twas fun, and parting is such sweet sorrow".

 

[HomeBuyerStrike]

but in another post you said Australia WASN'T different....? which one is it?

I don't see how your quoted segment has any relevance to your question.