Rents still too high

johnboy 4 August 2009 34

The ABC has a piece on the high rental prices in Canberra.

    The report by the ACT Shelter organisation says the rental trap is putting pressure on the public housing sector as people leave crisis accommodation.

    The report found the ACT has Australia’s highest proportion of people leaving crisis services and going into public housing at 34 per cent. That is compared to 14 per cent nationally.

    The Territory also has the lowest rate – at 12 per cent – of people going into private rental from crisis services. That is less than half the national average.

    Jeffrey Dalton from ACT Shelter says more people are becoming stuck in crisis accommodation leading to a shortage of emergency housing.

    “There are simply not enough viable options for people who are leaving crisis services in order to get into sustainable housing,” he said.

Basically without a household income over $70k it’s not viable. So we all cram into share houses and say thankyou for a room and an argument over who cleaned the kitchen last.

But hey, smug boomers can bore us all with talk of their real estate wisdom thanks to the good fortune of having been born before they had a chance to screw everything up. And that’s the really important thing.


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Grail Grail 4:26 pm 14 Sep 11

wycx said :

I suggest that those tax benefits are part of the problem. I have said enough on this topic before.

100% agree with you there.

As a landlord, I can claim interest on the loan, maintenance costs, water supply costs, and depreciation on every brick and dab of paint I add to the place, as a deduction against my income. On top of that, I have someone else paying the loan repayments for me.

As an owner, I can’t claim anything as a deduction against my income, and I’m paying my own loan repayments.

Owning your own place is too expensive. Buy an investment property to rent to your friend, live in your friend’s rental property.

Grail Grail 4:21 pm 14 Sep 11

I’m Gen X, not a smug boomer, thankyouverymuch.

Friska said :

What I find frustrating is getting a letter in the mail just after your lease has expired stating the rent would increase by $30 per week. I sent my agent a “nice” letter and said I would pay an extra $10 per week fullstop. This was agreed by the owner, they didnt want to bother looking for someone else. So if you fight for your right, especially with rent increases, you may win.

^ Good advice for all tenants. Don’t assume that speaking up about problems with the house, contract, property manager or price is going to get you turfed out. The landlord wants tenants in that property.

I was living in group houses up until I bought my own place. Which I then promptly rented out because living alone is far too expensive! Sure, you have arguments, sure if you have two couples you sometimes have trouble when one couple wants to shag in the lounge and the other couple arrives home with guests. But that’s life. You deal with it.

Dazzlar Dazzlar 5:21 pm 05 Aug 09

Thanks for that. Not sure I will do anything about it. The landlord has always been reasonable when it comes to having things fixed etc.

j from the block j from the block 1:33 pm 05 Aug 09

Selling out has its upsides.
While I miss lack of responsibility, and dreaming about how awesome the world could be, and how maybe I could make it a happier place, I do enjoy cable TV, central heating, and focusing on making my immediate family unit a happier place

kumadude kumadude 12:21 pm 05 Aug 09

wycx said “I think you mean you should have put your money into shares last November. Now would appear to be the time to profit take before the sucker rally ends…”

Exactly, the drop in term deposit rates lined up with the drop in the share index, easy transfer of money. I am going to hold and not sell. In theory it should eventually go back to its peak of 5900/6000, but might not occur. If the bulk of the market is held by superannuation funds and the bulk of their customers are retiring baby boomers, then we may never see it rise to its previous heights.

I would still suggest throwing all your money into shares (spread risk if you wish), only at 4250 and has at least a 1000 more for growth. Maybe even 30% into foreign shares, exchange rate is up: if it drops you profit, internationally shares are rising again: more profit.

wycx wycx 12:13 pm 05 Aug 09

kumadude said :

If aiming high and taking advantage of opportunities when they arise is “selling out”, then so be it. Honestly, you want cash : put it into shares. they bottomed out at 3400 +/- and now the index is at 4250 +/-, you could have made almost 30% within 4 – 5 months.

I think you mean you should have put your money into shares last November. Now would appear to be the time to profit take before the sucker rally ends…

VYBerlinaV8_the_one_they_all_copy said :

Have you considered buying an investment property? Find a unit or house in a popular suburb priced between the suburb median and suburb median minus 20%, buy it and rent it out for say 5 years. You will get some good tax benefits, and within 3 or so years it should start throwing off positive cashflow. Then, use that cashflow to help you with a mortgage on a place of your own. Alternatively, move into it yourself.

I suggest that those tax benefits are part of the problem. I have said enough on this topic before. I will say no more.

Also, is this cycle comparable to recent previous cycles. Private Debt to GDP and hosehold debt to disposable income are at unseen levels. That has to matter doesn’t it?

The other question is credit. VY is correct to say that land demand/supply relations in cities are a factor, but I think as big a factor, or even larger is the supply of credit, something Australian banks have little control over. Check out what the Future Fund chairman has to say:
http://www.abc.net.au/lateline/business/items/200907/s2641598.htm

kumadude kumadude 11:55 am 05 Aug 09

Jim, not sure which post you are reading, but i don’t remember calling anyone a bludger, yet.

self-righteous:
If someone like myself, who grew up on a Nimbin commune, took 7 years to get my piece of paper and spent 15 years partying can still manage to scrape a few pesos together to purchase a hole in a hole (as you seem to believe)….do you really think I am going to listen to such rubbish?

“not a scabby little flat in struggletown”: the exact base of my argument.
Most importantly you totally missed my point, why aim for something you can’t afford and be angry, when you can buy in low and upgrade later.

Return serve:”a decent suburb in Canberra”? You are joking right, Canberra…the most irrelevant place in Australia. Queanbeyan: i would rather live with scabs, than in a territory full of bogans, emos and try hard goths.

j from the block j from the block 11:45 am 05 Aug 09

As a renter (in canberra) and an owner (in rural NSW), I think it is expensive to rent, I although think it is expensive to own.
Life at present, just seems fairly expensive, food petrol etc.
This is not a complaint, I enjoyed it when it was cheaper, true, but the same goes for when I make more, or less money, I am one of those folk who enjoys having more disposable income than less.
As I try to explain to the teen ragers, living, costs money. If you want more, at least in my experience, you work longer hours, or you look for higher paid work. Take a second job, sacrifice some enjoyable luxuries.

johnboy johnboy 11:21 am 05 Aug 09

Alright, let’s take the personalities out of this shall we?

Jim Jones Jim Jones 11:16 am 05 Aug 09

It’s just lovely that your response to the general unhappiness with your self-righteous attitude consists of unfounded personal attacks: ‘You’re lazy, you’re a bludger, you have no right to argue on this topic, etc.’

I’m around your age, own a house in a decent suburb in Canberra (not a scabby little flat in struggletown) and have never had any assistance from my family, but I’m under no illusions that this somehow makes me better than anyone else.

I suggest you open your eyes and realise that there are other people in the world, people who – for many different reasons (one of which are in the facile Ayn Randian categories of ‘laziness’ or ‘lack of gumption’) – can’t afford to enter the property market and are forced to deal with the rental market.

I’d also suggest you get off your high horse, but given the extreme height that it’s at, the fall might kill you.

kumadude kumadude 11:07 am 05 Aug 09

arescarti42 said :

Hmmm, what part of my “lifestyle” do i cut back on first, food or bus passes to get to work?

Kumadude, you are a TOOL.

thanks arescarti42,

Mate, if you can’t afford to live where you are….well, its basic maths isn’t it.

You are probably one of those emotional types that has benefited from the gains your parents have made and now you can sit back at uni, feeling as though you have the right to complain about everything.

You probably also live at home, pay no rent or electricity and still feel you have the right to argue about this topic.

I am glad to hear people that support economically rational decisions. Not everyone expects handouts from their parents (the baby boomers), some have actually saved each week and accumulated enough cash to “sell out” and join the property market.

If aiming high and taking advantage of opportunities when they arise is “selling out”, then so be it. Honestly, you want cash : put it into shares. they bottomed out at 3400 +/- and now the index is at 4250 +/-, you could have made almost 30% within 4 – 5 months. Don’t be scared when everything is going to the sewers, take advantage of the idiots…can’t get more punk/alternative/independent than that. IT IS MY METHOD OF PUNISHING THE BABY BOOMERS (hypocritical hippies).

VYBerlinaV8_the_one_they_all_copy VYBerlinaV8_the_one_they_all_copy 11:02 am 05 Aug 09

Forget the letter. Ring the agent and politely ask if you can pay $x less rent than you have been advised, but in return you will [fill in yourself here]. You could offer to sign a 12 months lease, or do up the garden, or something.

But if you’ve been slack with paying rent on time, or damaged the property, then forget it. If you’ve been a good tenant, you should be able to negotiate no problems.

YouWhat YouWhat 10:40 am 05 Aug 09

Dazzlar said :

We’ve been advised that our rent is to increase from $350 p/wk to $370 p/wk, is that reasonable do you think?

Dazzlar, the Tenants’ Union has information to help you determine whether a price rise is reasonable or not. There’s a calculation that’s linked to CPI that determines whether an increase could be excessive (http://www.tenantsact.org.au/Advice/rent2.html). As the as the Union states, that’s really only a starting point, and if the place needs work or you have other bargaining chips then you might be able to work something out.

(Don’t ask me how to word a letter negotiating such things; I leave such matters to my lovely better half, who can bat her eyelashes and get people to do all sorts of things they wouldn’t for me!)

Sleaz274 Sleaz274 10:25 am 05 Aug 09

Of course you are all talking at a macro level and if one thing we have learnt over the last year is that macro economics really has no way to predict anything because the system is too large and undergoing constant change.

If you have enough money to be thinking of investment in macro terms then you already have enough money so go work for an aid organisation or adopt 30 kids.

The rest of us need to think micro level. Can i afford it? What are the repayments? Will I eat baked beans on toast for 10 years? Can I afford to move if I need to? What if I or someone in my family has an accident? Could I rent a bedroom out? Can I afford extensions/repairs?

Buy off someone who has to sell and will accept a low price, haggle and be prepared to walk. Pay as much as you can early then rent it and buy again. Be patient and accumulate as much deposit as you are physically able. Unfortunately that’s about $30,000 nowadays which is 2 years of saving $600 a pay.

Think micro people do not be scared by macro economists.

VYBerlinaV8_the_one_they_all_copy VYBerlinaV8_the_one_they_all_copy 8:56 am 05 Aug 09

Ryoma,

Like Clown Killer, I don’t think your gamble will pay off. Australia has a very different housing market to places like the UK and US, in that the vast majority of our population live in a few majors cities, and social indicators have more people moving toward the cities than the country. Further, real estate investment doesn’t necessarily rely on continuous capital growth. There are properties available in Canberra that within 2-3 years will generate sufficient income to pay all expenses, plus some principle (after tax effect).

There are people who claim Australia has an oversupply of dwellings, but most of the empty dwellings are in country towns that are shrinking (dare I say dying). Demand for property in cities is currently huge, and not looking like subsiding any time soon. Remember how the banks have reported drops in home loan approvals? A lot of that is simply people no longer borrowing against their homes for lifestyle purchases.

All that said, the actual market is priced pretty high at the moment. If the last few property cycles offer any insight, however, median property prices don’t generally drop much in nominal terms during the downward part of the cycle, they simply stagnate (perhaps with a small drop) while incomes and other costs catch up.

So – what to do? Have you considered buying an investment property? Find a unit or house in a popular suburb priced between the suburb median and suburb median minus 20%, buy it and rent it out for say 5 years. You will get some good tax benefits, and within 3 or so years it should start throwing off positive cashflow. Then, use that cashflow to help you with a mortgage on a place of your own. Alternatively, move into it yourself.

My suspicion is that we may end up being in a similar situation to major cities in other western countries, like London, New York, etc, where well located city property is simply out of reach for the general population, and if you want to live in that location, you have to rent. Country houses are usually cheap enough for anyone to buy.

Good luck.

Ryoma Ryoma 8:25 am 05 Aug 09

Clown Killer,

I think (honestly), that the results will vary across regions – may in fact be worse in areas full of elderly people and holiday houses, and better in cities like Canberra where employment stays (relatively) strong. What you say is a good point, and thankyou for your best wishes :).

However, I think that there is a big assumption that people keep making regarding future demand – immigration. If we do indeed have a nasty, prolonged crash, I feel we will not get anywhere near as many immigrants as we expect. The difference between now and the last recession is that the economies of many of our immigration source countries are now generating employment and standards of living equal to or better than ours.

Unless we take in more refugees (who are hardly likely to be buying houses, at least to start with), which is unlikely given how they have been portrayed in the past decade, I do not think we can blithely assume immigrants will just keep coming.

Our reputation in India has taken a belting recently (whether deserved or not I don’t know, but perceptions count), and many other countries are going to be competing for the same skilled migrants that we are.

For what it’s worth, maybe as a community we need to really look closely at how we deal with this housing gap across generations so that nobody has to lose out badly. Maybe the government, or private invstors, can pay some of the gap between what Baby Boomers can afford to sell for and Gen X and Y can afford to buy for, and take a percentage of the mortgage income?

Clown Killer Clown Killer 8:00 am 05 Aug 09

Ryoma I suspect that your gamble on timing the real estate market will not bear fruit. Placing too great an emphasis on the anticipated financial stress of the ‘baby boomer’ generation and its attendant ability to distorting the market ignores the fact that there are still a significant number of other younger people in the market.

Many people in their late 30s and early 40s who bought in the 1990s have now paid off their homes and are seeking to use that equity to purchase investments – there will be little pressure on these people to sell those investment properties for 30 or more years and their strong position in the market will make it harder for market entrants to compete – just like it does now.

Good luck though.

bannister bannister 12:34 am 05 Aug 09

I think that rent prices are far too high at the moment.

2604 2604 11:12 pm 04 Aug 09

Sky-high rents are a function of the stupid prices that people are paying for property nowadays.

Prices are so high that anyone purchasing an investment property today is looking at an initial GROSS yield of 5%, tops. After paying land tax, rates, body corp fees, property management fees etc, and amortising stamp duty and other purchase costs over the life of the property, you’ll get a miniscule 2-3% return per annum – peanuts. No wonder landlords want to keep on increasing their rents.

The gov’t should quarantine investment income (including from rental properties) and only allow investment losses to be claimed against investment income.

Ryoma Ryoma 10:23 pm 04 Aug 09

What’s that ringing noise? Oh that’s right – the bell that rings for thee, Boomers.

Our housing market is the greatest Ponzi scheme this country has ever seen. I earn around the average wage and do not have an extravagant lifestyle, but would not buy a house at present, especially with the First Home Mug’s Bribe (sorry, “Owner’s Grant”) inflating the market.

But I am OK with waiting, because those prices are on their way down very soon – I give it 2 years to fall further and harder than the USA or UK.

Why? The papers would have us believe things are rosy again. This despite German authorities refusing to “stress test” their banks for fear of what they will find, an Australian Government looking for triggers to hold an early election ahead of chickens coming home to roost, and America and much of Europe in the same place as Japan has been for 20 years.

What happens when you cut interest rates and no-one spends because (a) they fear for their jobs and the future and (b) they are so deeply in debt it makes no difference to them? Where does economic demand arise from then?

Our first wave of our Baby Boomer generation have just passed 65. Many have lost much of their super, and they will not be spending up big. Others of this generation will lose their jobs – ditto. Within 10 years many Boomers will need nursing care they cannot possibly pay for, and when they do, they will try selling their houses for what they think it’s worth.

$500K? My generation can’t afford that – bank manager will laugh me out of his office (and naturally, he or she is a Baby Boomer). $350K – yes, this will buy me a poorly designed dogbox miles from anywhere. I’ve waited for a while, why would I buy that? After all, the house prices are going to keep falling.

$200K – that’s more like it, because interest rates have gone through the roof to pay for government stimulus packages worldwide. I can afford this – just – as my real wages have been cut to pay enough tax for the Baby Boomers health care.

But that’s OK. I can buy all over Canberra, or other cities now, because it is a massive fire sale. And the truth shall be revealed – any asset is only worth what the market will pay for it at any given time.

Bring on the future – I am investing offshore in countries with better demographics.

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