Tenants feel the pain of soaring rents

What’s a tenant to do these days? Vacancy rates are dropping, causing rents to soar and it’s the many low income earners across Australia’s capital cities stuck in the rental rate race who are feeling the pinch.

Now it seems that younger generations and working-class families not only have to contend with the fact that they are being priced out of the housing market as first home buyers, but also skyrocketing rents for what is a basic human necessity – a roof over their heads.

According to the latest Private Rental Affordability Bulletin compiled by the Tenants Union of Victoria, a family of four living on the minimum wage of $29,500 per year would be forking out between 35% and 60% of their income on rent alone for a typical three-bedroom home in any major city.

The data, published on domain.com.au, indicates that a “minimum wage” working family with two children would spend 36.8% of their income on a typical three-bedroom home in Melbourne, while pensioners in the city are spending 71% of their income on the median rent payable for a single bedroom flat.

Those on a government Newstart allowance who rent a room in a two bedroom share flat scenario in Melbourne would be paying $170 per week on average, or 63% of their entire income.

These are alarming figures when it is considered that anyone spending more than 30% of their income on rent is struggling with “housing stress” and unable to save.

The Office of Housing says that fierce competition has driven up rents for three-bedroom homes by between 3.9 and 11% across Melbourne, with vacancy rates for private rentals sitting at a low 1.4% for the December 2010 quarter.

Some of the worst areas for tenants in Melbourne are St Kilda East, where 60.7% of the average minimum wage earner’s income goes toward the weekly rent, followed by Brunswick (58.8%), Balwyn (53.5%), Preston (43.58%) and Ringwood (40.1%).

The issue is further compounded by the extensive waiting list for much needed community and public housing, with close to 50,000 people in total waiting for affordable accommodation to become available through such incentives.

Meanwhile, both sides of state government play the blame game, with the Liberals pointing the finger at Labor’s failed housing policies during their 10 year reign as the cause of the current housing crisis and the opposition suggesting it’s the fault of the recent population boom.

Regardless of the incessant political rhetoric one thing is clear – tenants are feeling the pinch as rents show no sign of slowing down.

Of course for investors, this means higher yields. It’s that time in the property cycle where capital growth is lower, but rents catch up. That’s the way the property cycle works.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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