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Squeeze is on with rents rising again in a tightening market

Ian Bushnell 13 November 2019 30
Rents are on the rise again

There has been strong demand for rental houses in Canberra. Photos: File.

Canberra’s rents are on the rise again, particularly for houses which had the nation’s highest monthly increase in October.

SQM Research said asking rents for houses surged 4.5 per cent to $643 a week to 12 November, compared with $614 a month ago when rents actually fell 1.4 per cent.

Asking rents for units also went up by 2 per cent to $471 a week, compared with $462. This comes on top of a 4.4 per cent rise a month earlier.

Over the 12 months to 12 November, asking rents for houses in the national capital rose 0.7 per cent, while demand for units saw rents go up a solid 5 per cent, bucking the national trend.

While the vacancy rate has improved since this time last year when it was a very difficult 0.6 per cent with only 387 vacancies, it remains a tight market with a vacancy rate of 1 per cent and 647 vacancies, down from the September figure of 668 vacancies.

Unit rents have risen 5 per cent in the year to November

Unit rents have risen 5 per cent over the year to 12 November.

The market has tightened since winter when the June vacancy rate was 1.3 per cent with 847 properties. Rents at 12 July were $624 and $461 a week and dipped to $604 and $459 two months later. But they are now rebounding, with tenants now facing fewer properties to choose from and having to fork out more not just in rent but bond as well.

Canberra rents for both houses and units remain only second to Sydney, with demand fed by population growth, a strong jobs market and declining home ownership.

The Tenants’ Union says there has been a 140 per cent increase in the rental market over the last decade, with 143,000 people now in rented accommodation in the ACT.

Nationally, vacancy rates were steady at 2.1 per cent. Hobart was the lowest at 0.5 per cent, and Sydney and Darwin the highest at 3.1 per cent.

Capital city asking rents increased 0.9 per cent for houses but remained steady for units at $549 and $435 respectively. But over the 12 months, asking rents declined 0.7 per cent for both houses and units.

Sydney rents rose over the month, 1.5 per cent for houses and 0.2 per cent for units, but the harbour city is still recording rent falls of over 4.0 per cent year on year.


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30 Responses to Squeeze is on with rents rising again in a tightening market
Karen Feng Karen Feng 6:26 pm 15 Nov 19

I think it depends on the location. but the gov should start some form of rent control. less rent. means more money for food and other stuff. therefore a better economy.

    Julie Macklin Julie Macklin 1:01 am 16 Nov 19

    Less rent means less places available to rent and more people not able to find a place to rent.

    Karen Feng Karen Feng 8:56 pm 17 Nov 19

    Julie Macklin i like the idea that more people can afford to rent. at the moment a lot of places are very pricey to rent.

Toni Cooper Toni Cooper 6:17 pm 14 Nov 19

Christine Bruce crazy market

bj_ACT bj_ACT 4:13 pm 14 Nov 19

Rates and land tax account for over $100 dollars per week of a pretty average rental property.

The outer suburban house rental properties to lower income tenants are likely years beyond getting any tax advantage through depreciation and probably not big loans to gain from the recent interest rate reductions.

This would suggest to me that a decent proportion of the high rental increases in Canberra houses are due to ‘under supply of rental properties’ and the ACT Government property tax increases.

Melissa Rowe Melissa Rowe 3:12 pm 14 Nov 19

So many people making ignorant comments about 'selfish' or 'greedy' landlords.

Interest rates may have gone down, but they are only one peice of the pie. Rates and land tax have gone up significantly and increased rents barely scratch the surface of that.

If a landlord has a place that is renting out a 3 bedroom place for $500 per week, thats 26k per year. Sounds like a lot right?

Now they get taxed on that entire amount. Obviously tax varies from person to person, so lets ignore that for now.

They are losing $40- 50 each week in property management fees. So they are left with say 24k after pm fees (thats at a cheap rate of 7.7% many property managers in Canberra charge significantly more).

And then they may be getting charged 2.5k for rates and 3k for land tax. That's a fair chunk gone already. Lets say that leaves 18.5k income.

On top of this they probably have roughly 5k maintenance costs each year. So that's 12.5k left.

Now we have to factor in mortage repayments. Let assume this place ISN'T mortgaged to the hilt like most investment properties are, and assume a modest mortgage of about 450k. That's a repayment of about $2000 per month. Or 24k per year.

So the landlord is paying over 11.5k out of their own pocket to keep their tenant housed each year.

And thats not factoring in the investor mortgages have higher interest rates then owner occupier mortgages. An investor may still be paying 5% interest whilst an owner occupier may be at 3%. If the mortgage is higher, obviously their mortgage repayments are much higher too.

Most landlords aren't making money out of the rent. They are still dipping into their own pockets to pay the property down so that maybe, in the future sometime, they can possibly sell it again. Perhaps to fund their retirement, so that they aren't reliant on on the government to pay them a pension.

If there were no landlords doing this, investing in property; then there would also be no rentals available for people to live in.

If you think its hard to find a rental with a 1% vacancy rate, it would be impossible with a 0% vacancy rate. And even if house prices dropped dramatically and were cheap as chips (I disagree with this premise, but for arguments sake will assume its true). There would still be a LOT of people out there who cannot buy a house. Maybe they have bad credit, or too many dependants, or some other reason. Those people would then be homeless, because they couldn't buy and there would be notging at all to rent.

Landlords provide a service. And most of them are just everyday people struggling to get by themselves. Maybe they are lucky enough to "own" (mortgage) a property they are renting out. But that doesn't mean they are rolling in wealth.

    Karen Feng Karen Feng 6:36 pm 15 Nov 19

    Melissa Rowe you forgot to mention rates, water and council rates. previously when I was renting out. my family didn't intend to make a profit. after renting out the place we still have to pay an additional $200/week to cover mortgages and other costs. Our only gain is that we got an additional $300 for the mortgage. zero profit.

    Doris Andrews Doris Andrews 6:54 pm 15 Nov 19

    Thank you Melissa Rowe for giving a detailed breakdown of the reality of being a landlord in the ACT. It would be great if more people knew the reality of being a landlord in the ACT. There are no property moguls around here. Some landlords are doing it tougher than their tenants.

    Melissa Rowe Melissa Rowe 6:55 pm 15 Nov 19

    Karen Feng yep. Also didn't mention any of the insurances either, like building and contents, and landlord insurance.

    It was just a very rough basic breakdown.

Colette Robinson Colette Robinson 9:32 am 14 Nov 19

How many properties are vacant and intentionally not listed though? How many are listed on AirB&B instead?

Joanne Gallagher Joanne Gallagher 8:48 am 14 Nov 19

And it will rise even further each year Barr government in power. The costs get passed on to tenants.

Acton Acton 8:12 am 14 Nov 19

When are renters going to realise that a vote for ACT Labor means a vote for 7-11% yearly rises in rates, which must and will result in higher yearly rents. ACT Labor is reducing the standard of living for everyone in Canberra, except for their wealthy property developer apartment building mates. In every respect ACT Labor has mutated into a party for the elite few.

Carole Ford Carole Ford 7:23 am 14 Nov 19

No surprise here, with rates going up like a rocket, those costs have been passed on. Blame the Barr government!

Bri Heseltine Bri Heseltine 6:32 am 14 Nov 19

I'm really astounded by the amount of greed this signals. The RBA has slashed rates to the extent my mortgage is $200 less each month. Surely landlords don't expect a tenant to fully pay off their asset for them? How selfish. It's your asset. Tenants dream of that possibility.

    Melissa Rowe Melissa Rowe 3:05 pm 14 Nov 19

    Bri Heseltine interest rates may have gone down, but they are only one peice of the pie. Rates and land tax have gone up significantly and increased rents barely scratch the surface of that.

    If a landlord has a place that is renting out a 3 bedroom place for $500 per week, thats 26k per year. Sounds like a lot right?

    Now they get taxed on that entire amount. Obviously tax varies from person to person, so lets ignore that for now.

    They are losing $40- 50 each week in property management fees. So they are left with say 24k after pm fees (thats at a cheap rate of 7.7% many property managers in Canberra charge significantly more).

    And then they may be getting charged 2.5k for rates and 3k for land tax. That's a fair chunk gone already. Lets say that leaves 18.5k income.

    On top of this they probably have roughly 5k maintenance costs each year. So that's 12.5k left.

    Now we have to factor in mortage repayments. Let assume this place ISN'T mortgaged to the hilt like most investment properties are, and assume a modest mortgage of about 450k. That's a repayment of about $2000 per month. Or 24k per year.

    So the landlord is paying over 11.5k out of their own pocket to keep their tenant housed each year.

    And thats not factoring in the investor mortgages have higher interest rates then owner occupier mortgages. An investor may still be paying 5% interest whilst an owner occupier may be at 3%. If the mortgage is higher, obviously their mortgage repayments are much higher too.

    Most landlords aren't making money out of the rent. They are still dipping into their own pockets to pay the property down so that maybe, in the future sometime, they can possibly sell it again. Perhaps to fund their retirement, so that they aren't reliant on on the government to pay them a pension.

noid noid 9:45 pm 13 Nov 19

As a former owner of two rental properties in Canberra, the cost of rates and land tax amounted close to half the annual rent…..just not worth it anymore. Sold both and put money into super because was not prepared to double the rent to make it worth our while. And would have somehow had to get rid of the tenant so as to have been able to increase the rent a sufficient amount just to get back to the margin before the increases.

Sharon Bishop Sharon Bishop 9:13 pm 13 Nov 19

Brendan Bishop I think we figured this out

Jarrod Sopniewski Jarrod Sopniewski 7:28 pm 13 Nov 19

Tia Grayson Jerod Blyton what a lovely time to be looking for accommo

Kimberley Lloyd Kimberley Lloyd 5:07 pm 13 Nov 19

Not surprised. For an apartment Rent price has to cover rates, body corporate, mortgage repayment and have some profits on top to make it.

    Karen Feng Karen Feng 6:30 pm 15 Nov 19

    Then I obviously did it wrong. years ago when I need to rent out my family's home. I set a nice cheap rate of $350/week to cover most of the mortgage and insurance. average rates in the area was $450/week. our objective was to not make a loss and hopefully those jerks will look after the place till we have to move in,in 5 years time.

    We didn't make any profit and it annoy me they didn't clean the the place since we gave them 1 week rent free. 😠

Grimm Grimm 5:00 pm 13 Nov 19

Gee, what a surprise! I must be psychic, because I could swear I said rents will rise along with landlords insurance, which has shot up dramatically in the ACT after the new laws allowing pets and modifications. Between that and ACT Labor with their rate rise scam, it’s going to get a lot worse. Hilarious.

Jorge Gatica Jorge Gatica 4:22 pm 13 Nov 19

Must be to do with the high rates and land tax

    Luke Dent Luke Dent 4:30 pm 13 Nov 19

    Thats exactly what it is Jorge, investors have been turned off since the ACT government started increasing rates and land tax, especially land tax. If they are serious about easing the burden of high rents on tenants in Canberra then they need to encourage more investors to buy by reducing these costs

    Jorge Gatica Jorge Gatica 4:53 pm 13 Nov 19

    Luke Dent it won’t happen, it’s the government way to latch on to people trying to have a go

    Doris Andrews Doris Andrews 5:13 pm 13 Nov 19

    Jorge Gatica sadly. True

    Grace Morgan Grace Morgan 6:54 pm 13 Nov 19

    It has to pay for its ridiculous tram.

    Andrew O'Brien Andrew O'Brien 7:47 am 14 Nov 19

    Jorge Gatica trying to have a go??

    Karen Feng Karen Feng 6:33 pm 15 Nov 19

    Jorge Gatica I agree with this. if I'm ever renting out my family's home in the future I can not afford to take $100-$200 off the market rent. the rates have gone up significantly in the town our family's home is in.

Doris Andrews Doris Andrews 2:41 pm 13 Nov 19

I hope the government does not succeed in getting rid of the Tenants Union as they plan to do. The Union is essential at times like this.

    Doris Andrews Doris Andrews 6:49 pm 15 Nov 19

    Unfortunately the current ACT government does whatever it pleases and too bad if the outcome hurts those less able to help themselves.

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