Rents will rise strongly over the next few years

It seems clear that rents are going to keep rising as our property markets enter the next stage of the property cycle.

More tenants are being caught in the rental treadmill of rising rents, rising house prices, meaning they need a bigger deposit and decreasing serviceability of loans as interest rates keep rising.

And the cost of renting is expected to become even more expensive due to a boost in population and a shortfall of new homes being built.According to the minutes of the Reserve Bank of Australia’s October monetary policy board meeting, there were signs the rental market was “tightening again” with vacancy rates falling from levels that were “already quite low”.

“Tightness in the rental market (is) likely to persist given the ongoing strong population growth and the decline in housing approvals this year, and could be expected to feed into increases in rents,” according to meeting notes.

“Approvals for construction of apartments remained at low levels in most states, with Victoria a clear exception.”

Recently the latest BIS Shrapnel residential property prospects survey shows the rental market is likely to remain tight, with rental growth for investors still strong in Sydney and Melbourne, but slowing in the other capitals.

“With vacancy rates in most cities expected to stay tight…rental growth in the five to seven per range is likely in the short term,” the report said.

“Rising prices and high interest rates over the past year may also keep tenants in rental longer while they accumulate savings to purchase a home.”

In June 2010 the vacancy rate in Sydney was 1.3 per cent and rental growth was almost 10 per cent, while Melbourne’s vacancy rate was 1.5 per cent and growth was 8.2 per cent.

The most difficult city to find a rental is Adelaide, which has a vacancy rate of just 1.1 per cent.


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