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Rents going down

johnboy 11 July 2013 70

The ABC has the happy news that Canberra’s hideous rental market is finally coming down:

The latest report by Australian Property Monitors shows the median asking rent for units dropped nearly 5 per cent in the past three months, or $20, to $410 a week.

Over the year, rents fell nearly 7 per cent or $30 a week.

They are the highest falls of any state or territory capital city.

The average rent for houses dropped 1 per cent in the past three months, or $5, to $480 a week.


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Rents going down
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OLydia 8:15 pm 02 Sep 13

“Rents going down”. What a misleading heading. Rents are not actually going down – mine certainly isn’t. A better heading might be “Average rents not rising as quickly”. Also, bad form to extrapolate that rents are going up or down solely looking at the average over a particularly short period of time – ie three months.

I am on a month to month contract directly with landlord and the rent is reviewed whenever the landlord remembers to do so. Every time the rent has gone up and its likely to go up at the next review, whenever that may be. And I will pay the increase.

Why? If I don’t accept the increase and the landlord won’t accept the rent staying the same or (heaven forbid) actually decreasing, we will have to part company. I don’t want the disruption and headache of finding another place to live – moving house, changing contact details, moving to a part of town you don’t know as well, etc etc. Often long term renters will pay an extra $30-$40 per week to avoid that sort of pain.

Madam Cholet 6:20 pm 02 Sep 13

I had valuations on both of my properties in the last couple of weeks. One down on the Sapphire coast which had apparently moved 20k in the right direction in the space of 16 months, and the other my home in Canberra which apparently has gone down 10k in the same space of time. A bit painful to hear that, and of course we disputed it – but to no avail. Interestingly tho the two sets of valuations I had done came in the same for the coastal property and 20k difference for Canberra.

I thnk the Canberra market is a bit confused right now – at least judging by the range in sale prices in my street anyway.

Darkfalz 3:35 pm 02 Sep 13

Dilandach said :

Wonder how the market is going to react with the inevitable oncoming storm of coalition hack n’ slash.

Don’t expect miracles.

thebrownstreak69 2:10 pm 02 Sep 13

arescarti42 said :

thebrownstreak69 said :

Rents are probably going down because prices are going up.

http://www.abc.net.au/news/2013-09-02/house-prices-rise-by-half-of-one-per-cent-in-august/4928486

How exactly would rising nominal house prices cause rents to fall?

The reason rents are falling is because there’s a massive amount of supply.

House prices rise because more people are buying, leaving fewer people competing for the available pool of rentals.

There is not ‘a massive amount of supply’, it’s just that there’s more supply than, say, 2 years ago. The trouble is that a lot of the new supply is expensive mid-luxury apartments, which is not what a lot of people want.

The big question will be what happens with the election, and how the new government plans to implement changes. At this stage I think either side would cut the PS, and this will have flow on effects to Canberra house prices. The questions will be how, and how much.

arescarti42 1:39 pm 02 Sep 13

thebrownstreak69 said :

Rents are probably going down because prices are going up.

http://www.abc.net.au/news/2013-09-02/house-prices-rise-by-half-of-one-per-cent-in-august/4928486

How exactly would rising nominal house prices cause rents to fall?

The reason rents are falling is because there’s a massive amount of supply.

thebrownstreak69 1:20 pm 02 Sep 13
Dilandach 12:16 pm 02 Sep 13

Wonder how the market is going to react with the inevitable oncoming storm of coalition hack n’ slash.

Darkfalz 12:08 pm 02 Sep 13

Pretty sure I’m going to be slugged as soon as the 12 months period since my last one transpires. I’m losing money not buying at the moment but just not ready to do so yet.

Arrow 11:16 am 02 Sep 13

Latest updates on the rental situation in Canberra:

http://www.canberrahouseprices.com/act-rental-situation-continues-to-improve/

Arrow 9:58 am 15 Jul 13

A good objective summary of the rent v buy argument here: http://www.macrobusiness.com.au/2013/07/cheaper-to-rent-than-buy-in-over-87-of-locations/
including discussion of hidden costs etc.

troll-sniffer 10:12 pm 12 Jul 13

Arrow said :

Genie said :

Renting doesn’t give you very good security, you can be given notice at any given time to pack up and move.

Wrong.

If you have a lease and you pay your rent, you cannot “be given notice at any given time to pack up and move”. You have security until the end of the lease.

I know there are plenty of renters out there who don’t know their rights and think they have to leave at any time, but you don’t. Even if the house is sold to a new owner.

Of course, when the lease expires, you may be told to leave. But in 12 years renting in Canberra, I’ve never had that happen. Landlords with decent properties are keen to keep good tenants – especially in the current climate – and will almost always want to keep you on.

Make sure you renew the lease, obviously – don’t go month to month.

Once again the furphy that you have to leave at the end of a lease. You don’t. You have to be given 26 weeks notice unless the landlord is planning renovations or wants the place for himself or family members. The last point is often used but a landlord who then rented out the property to a new tenant would obviously be in breach of the act.

Genie 5:52 pm 12 Jul 13

Arrow said :

Genie said :

Renting doesn’t give you very good security, you can be given notice at any given time to pack up and move.

Wrong.

If you have a lease and you pay your rent, you cannot “be given notice at any given time to pack up and move”. You have security until the end of the lease.

I know there are plenty of renters out there who don’t know their rights and think they have to leave at any time, but you don’t. Even if the house is sold to a new owner.

Of course, when the lease expires, you may be told to leave ………….

Make sure you renew the lease, obviously – don’t go month to month.

Even if you’re on yearly leases, you still have that chance that every year you could be given notice to move. I don’t consider that security. Your security is only good for 12 months. Bugger that.

devils_advocate 3:14 pm 12 Jul 13

Arrow said :

Genie said :

Renting doesn’t give you very good security, you can be given notice at any given time to pack up and move.

Wrong.

If you have a lease and you pay your rent, you cannot “be given notice at any given time to pack up and move”. You have security until the end of the lease.

I know there are plenty of renters out there who don’t know their rights and think they have to leave at any time, but you don’t. Even if the house is sold to a new owner.

Of course, when the lease expires, you may be told to leave. But in 12 years renting in Canberra, I’ve never had that happen. Landlords with decent properties are keen to keep good tenants – especially in the current climate – and will almost always want to keep you on.

Make sure you renew the lease, obviously – don’t go month to month.

The circumstances in which the tenant can be booted at short notice have been reduced, but not removed – for example, genuine need to house a family member or some such. The actual circumstances are fairly small but probably open to exploitation by unscrupulous types.

chewy14 2:45 pm 12 Jul 13

Watson said :

arescarti42 said :

Well the thing is it usually costs considerably more. Even if the mortgage for a certain place is exactly the same as renting it, you’re ignoring all the other costs that home ownership entails (rates, insurance, stamp duty, repairs, maintenance, body corporate fees, etc).

Then you also have to factor in costs relating to renting, like the cost of moving – removalists, end of lease cleaning, etc – every few years or if you’re unlucky more often. One such move would easily add up to what my annual rates cost me.

Most first home buyers get stamp duty concession (ie. pay $20) and the first home buyer grant.

And maintenance is a cost factor, unless you buy a brand new house, which should see you through the first few years without too many extra costs.

Then there is the fact that you almost inevitably pay more for heating (and cooling) in rentals because no one invests in insulation, which people do tend to do if they own their home. I paid close to $1,000 a quarter just for gas heating in winter in my last rental and am moving to a smaller place with a 6 star energy rating which will have all the appropriate window coverings, etc. Will report back when I have the figures but I expect a substantial saving there.

Like for like, it really isn’t that much of a difference, even in the first few years of owning. And of course, the rents will inevitably go up over time, but the mortgage repayments will stay the same for as long as the interest rates do.

And no one can kick you out of course or invade your privacy every few months to check if you dusted well enough and if your lawn is neat enough. And that is worth a bit of extra money to most people.

Watson,
I’m glad you’re happy with the house you purchased and obviously its working for you, but as has been repeatedly pointed out, like for like there IS a big difference in renting vs buying in most areas.

The possible extra costs of renting that you mention like heating or moving aren’t inherent to renting the way that rates, interest payments and maintenace are to buying. They’re possible costs that can be gotten around by research. You don’t have to spend thousands moving and its not like every house bought is a 7 star energy efficient place.

thebrownstreak69 2:41 pm 12 Jul 13

arescarti42 said :

thebrownstreak69 said :

arescarti42 said :

Case in point is the ~70% of investment properties that are negatively geared, the average loss is being ~$4300 a year. That axiomatically shows that the cost of renting is typically less than owning, on average to the tune of $4300 a year (for an investment property at least).

That doesn’t take into account depreciation of fixtures and fittings, and also doesn’t take into account the cost of the managing agent (which isn’t required on a PPOR).

Be careful with figures like this, they can be misleading.

As far as I’m aware depreciation is typically included in negative gearing losses. It’s a cost incurred by both investors and owner occupiers.

You’re dead right about management costs though, they didn’t occur to me and do lessen the negative gearing comparison.

Yeah but investors claim this on their tax, owner occupiers done’t, meaning that although the costs are indeed borne by each, the $4300 number would need to be adjusted to make it an apples with apples comparison.

Dilandach 2:36 pm 12 Jul 13

Arrow said :

Genie said :

Renting doesn’t give you very good security, you can be given notice at any given time to pack up and move.

Wrong.

If you have a lease and you pay your rent, you cannot “be given notice at any given time to pack up and move”. You have security until the end of the lease.

I know there are plenty of renters out there who don’t know their rights and think they have to leave at any time, but you don’t. Even if the house is sold to a new owner.

Of course, when the lease expires, you may be told to leave. But in 12 years renting in Canberra, I’ve never had that happen. Landlords with decent properties are keen to keep good tenants – especially in the current climate – and will almost always want to keep you on.

Make sure you renew the lease, obviously – don’t go month to month.

As I’ve posted on here before, my last landlord was a nightmare. The house was mouldy and we constantly had to battle with mould. If something was broken, the landlord himself would come around and fix it. So we’d be having a quasi-inspection whenever that was.

We’d also get no notice that he was turning up. The closest we got to notice was maybe a call 10 minutes before he turned up but that was a rarity. The majority of the time the notice was nothing more than looking out the window and seeing his car in the driveway and him walking up the driveway. Then we’d have to wait for him to fix things while his goofy mute son would follow him around the house like a puppy.

The last straw was when I had been studying at a library all day on my birthday, I’d been receiving calls from private numbers which I couldn’t answer for obvious reasons in the library. When I took a break and went outside my phone rang again from a private number. It was my parents giving birthday wishes, so I chalked up the other missed calls from private numbers as birthday well wishers. Instead when I got home, not 10 minutes after I arrived the landlord turns up unannounced full of fury about us reporting the mould issue (I think at that point for the 4th time to the 5th property manager we’d had) and to compound it I had not answered the phone when he had rung. I had explained to him that I was at the library and couldn’t answer calls straight away and that he had not left a message nor called from a number that I could see so how could I have possibly known?

That didn’t go over well and he just broke into threats of “I want you people out! This house was perfect before you people! (an absolute filthy lie)” in front of my mrs and two small kids. It took every fibre of my being not to retaliate both verbally and physically.

We moved out shortly after.

Highlights were:
* $1200+ per quarter electricity bills.
* Heater broke just before one winter, it took 4 months to get it fixed. (didn’t reduce electricity usage though)
* Oven element broke, took 2 months to get fixed.
* Mould in every wall and window sill.
* Moisture to the point it would run down walls and cause power points to start sparking.
* Insulation that was never inspected.
* Light sockets that would burn out their bulbs in under 2 weeks.

Not fun at all. I haven’t seen it rented out yet.

arescarti42 2:35 pm 12 Jul 13

devils_advocate said :

arescarti42 said :

devils_advocate said :

Which assets are depreciating? Does that apply equally to people who “buy” (to the extent possible in ACT) land as opposed to, say, a unit?

Well dwellings are falling in value, so both the land and the capital component are depreciating I’d say.

My point was really why would you pay a premium to buy now, when you can rent something for considerably less, save the difference, and buy in the future when prices are lower?

well there’s a difference between depreciation and mere falls (fluctuations) in value.

Depreciation usually refers to situations where the asset is actually reducing in its inherent value (i.e. a car becoming older, a building becoming older, etc). It is usually quantifiable in terms of a set proportion of the value reducing over the term of its life. Hence the need to distinguish between buildings (which decline in value) and land (which generally appreciates).

The problem with your strategy is that (save for situations like Japan) it requires an ability to pick the market. The risks are assymetric in one sense – prices go up on the elevators but down on the escalators. Trying to pick the bottom of the cycle is risky.

All fair points.

To clarify, I was using depreciate in the general sense, not the accounting sense.

arescarti42 2:31 pm 12 Jul 13

thebrownstreak69 said :

arescarti42 said :

Case in point is the ~70% of investment properties that are negatively geared, the average loss is being ~$4300 a year. That axiomatically shows that the cost of renting is typically less than owning, on average to the tune of $4300 a year (for an investment property at least).

That doesn’t take into account depreciation of fixtures and fittings, and also doesn’t take into account the cost of the managing agent (which isn’t required on a PPOR).

Be careful with figures like this, they can be misleading.

As far as I’m aware depreciation is typically included in negative gearing losses. It’s a cost incurred by both investors and owner occupiers.

You’re dead right about management costs though, they didn’t occur to me and do lessen the negative gearing comparison.

Arrow 2:01 pm 12 Jul 13

Genie said :

Renting doesn’t give you very good security, you can be given notice at any given time to pack up and move.

Wrong. If you have a lease and you pay your rent, you cannot “be given notice at any given time to pack up and move”. You have security until the end of the lease.

I know there are plenty of renters out there who don’t know their rights and think they have to leave at any time, but you don’t. Even if the house is sold to a new owner.

Of course, when the lease expires, you may be told to leave. But in 12 years renting in Canberra, I’ve never had that happen. Landlords with decent properties are keen to keep good tenants – especially in the current climate – and will almost always want to keep you on. Make sure you renew the lease, obviously – don’t go month to month.

thebrownstreak69 1:14 pm 12 Jul 13

arescarti42 said :

Case in point is the ~70% of investment properties that are negatively geared, the average loss is being ~$4300 a year. That axiomatically shows that the cost of renting is typically less than owning, on average to the tune of $4300 a year (for an investment property at least).

That doesn’t take into account depreciation of fixtures and fittings, and also doesn’t take into account the cost of the managing agent (which isn’t required on a PPOR).

Be careful with figures like this, they can be misleading.

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