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Rents going down

By 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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70 Responses to
Rents going down
rosscoact 2:07 pm 11 Jul 13

I dropped the rent on my unit by 15% when it became vacant a couple of weeks ago. It’s still vacant.

devils_advocate 1:58 pm 11 Jul 13

dungfungus said :

arescarti42 said :

dungfungus said :

This will only last until the rapacious landords receive their next rates notices. The increase will be passed onto the oppressed tenants at the first opportunity the lease gives them.

That’s not how it works. Rents are set by the market, not by the need for owners to recover their costs.

Try and charge above market rent and you’ll just end up with an empty rental.

All landords are going to receive the rates increase and collectively they will all increase the rent commensurately.
If your argument had any credibility we would be paying the same price for petrol in the ACT as Sydney people are.

Actually your petrol argument proves the opposite point to what you were trying to make. As with petrol, landlords will charge as much – but only as much – as teh market will bear. Despite recent experience, that cuts both ways (and now it’s working to the advantage of prospective tenants).

devils_advocate 1:57 pm 11 Jul 13

arescarti42 said :

dungfungus said :

arescarti42 said :

dungfungus said :

This will only last until the rapacious landords receive their next rates notices. The increase will be passed onto the oppressed tenants at the first opportunity the lease gives them.

That’s not how it works. Rents are set by the market, not by the need for owners to recover their costs.

Try and charge above market rent and you’ll just end up with an empty rental.

All landords are going to receive the rates increase and collectively they will all increase the rent commensurately.
If your argument had any credibility we would be paying the same price for petrol in the ACT as Sydney people are.

The markets for petrol and rental accommodation are completely different. For a start, the market for petrol in Sydney is a completely different one to that in Canberra (because if you live in Canberra, you can’t economically buy petrol in Sydney) but I wont go in to that.

What you’re suggesting is that the price for rental accommodation can increase universally, and it wont affect demand for rental accommodation one iota (in economic terms, that demand for rentals is completely inelastic).

I’ve got news for you, it isn’t. Households adapt. As prices increase, people share house more, move back to their parents, buy instead of rent, or move away from Canberra altogether reducing demand.

That’s why rents are falling now, and fast. It’s not landlords deciding “hey, my costs were lower this year, I’m going to be nice and pass it on to my tenant”. There’s massive supply coming on to the market, and in order to actually rent it all, prices need to drop to induce more demand.

This isn’t some personal crazy theory of mine, it’s economics 101.

+1000. To add to that, there’s ‘substitutability’.

Rent is not a good as such – is is part of a larger market called housing.

People choose between renting and buying a house. With house prices falling, and money on sale for cheap (5% interest rates!) I imagine a lot of people are opting to buy rather than rent. The availability of cheaper substitutes will cause the ‘price’ of a good to fall.

arescarti42 1:01 pm 11 Jul 13

dungfungus said :

arescarti42 said :

dungfungus said :

This will only last until the rapacious landords receive their next rates notices. The increase will be passed onto the oppressed tenants at the first opportunity the lease gives them.

That’s not how it works. Rents are set by the market, not by the need for owners to recover their costs.

Try and charge above market rent and you’ll just end up with an empty rental.

All landords are going to receive the rates increase and collectively they will all increase the rent commensurately.
If your argument had any credibility we would be paying the same price for petrol in the ACT as Sydney people are.

The markets for petrol and rental accommodation are completely different. For a start, the market for petrol in Sydney is a completely different one to that in Canberra (because if you live in Canberra, you can’t economically buy petrol in Sydney) but I wont go in to that.

What you’re suggesting is that the price for rental accommodation can increase universally, and it wont affect demand for rental accommodation one iota (in economic terms, that demand for rentals is completely inelastic).

I’ve got news for you, it isn’t. Households adapt. As prices increase, people share house more, move back to their parents, buy instead of rent, or move away from Canberra altogether reducing demand.

That’s why rents are falling now, and fast. It’s not landlords deciding “hey, my costs were lower this year, I’m going to be nice and pass it on to my tenant”. There’s massive supply coming on to the market, and in order to actually rent it all, prices need to drop to induce more demand.

This isn’t some personal crazy theory of mine, it’s economics 101.

Holden Caulfield 1:01 pm 11 Jul 13

dungfungus said :

If your argument had any credibility we would be paying the same price for petrol in the ACT as Sydney people are.

Thankfully we’re not.

I was in Sydney on Saturday and the going rate for 91RON seemed to be 157.9 or higher.

Even after the supposed large spike in ACT fuel prices in the last day or so the BP at Kingston was 148.9 this morning, while BP Phillip was 146.9 (or thereabouts).

SheepGroper 12:58 pm 11 Jul 13

dungfungus said :

All landords are going to receive the rates increase and collectively they will all increase the rent commensurately.

No. Rents can only be increased for a tenant at certain intervals. My agent tells me the rent’s up for review and gives a recommendation. It’s up to me whether I increase by the suggested amount, a lower one or not at all. The recommendation has nothing to do with how profitable that particular property is for me.

dungfungus 12:42 pm 11 Jul 13

arescarti42 said :

dungfungus said :

This will only last until the rapacious landords receive their next rates notices. The increase will be passed onto the oppressed tenants at the first opportunity the lease gives them.

That’s not how it works. Rents are set by the market, not by the need for owners to recover their costs.

Try and charge above market rent and you’ll just end up with an empty rental.

All landords are going to receive the rates increase and collectively they will all increase the rent commensurately.
If your argument had any credibility we would be paying the same price for petrol in the ACT as Sydney people are.

davo101 12:32 pm 11 Jul 13

bundah said :

I wonder whether that applies to the old south or inner north?

You can make all sorts of graphs here, the graph of vacancies looks interesting.

arescarti42 12:25 pm 11 Jul 13

dungfungus said :

This will only last until the rapacious landords receive their next rates notices. The increase will be passed onto the oppressed tenants at the first opportunity the lease gives them.

That’s not how it works. Rents are set by the market, not by the need for owners to recover their costs.

Try and charge above market rent and you’ll just end up with an empty rental.

johnboy 12:14 pm 11 Jul 13

Given the vast sea of “for lease” signs going up around town don’t be so sure about the capacity to pass on anything.

HiddenDragon 11:55 am 11 Jul 13

Good to see, and the falls in rents are presumably being reflected in purchase prices, too. If this town is ever to achieve genuine economic diversification it needs to become much more affordable, particularly for people who don’t have the relative certainty and comfort of a public sector income.

Watson 11:47 am 11 Jul 13

Great for the unit dwellers.

But $5 on a $480 rent is hardly something to woot about. Better than them going up, I suppose.

Thank heavens my renting days will be officially over tomorrow! Knowing my luck, you can expect to see the house prices plummet in the next few years.

dungfungus 11:19 am 11 Jul 13

This will only last until the rapacious landords receive their next rates notices. The increase will be passed onto the oppressed tenants at the first opportunity the lease gives them.

Martlark 11:06 am 11 Jul 13

Well,it was good for us explotitive classes whilst it lasted. Farewell old friend!

bundah 10:43 am 11 Jul 13

I wonder whether that applies to the old south or inner north?

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