13 December 2006

The rental squeeze

| johnboy
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Our Brave Leader keeps pumping out media releases telling us that housing affordability is the best in the nation. The most recent on was just last week.

Meanwhile today’s Canberra Times is packed with anecdotes on the red hot rental market ruining peoples lives.

Apparently investors have left the market due to land tax, which begs the question? Who’s living in all those units?

And is this all a beat-up by the real estate industry trying to influence Government policy?

UPDATED: Our Brave Leader has put out a media release saying the whole thing is a put-up job by the real estate industry and anyway he’s got a steering group out looking for “factors promoting affordability that the ACT Government can influence”.

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I had a look through the Kingston forshore display apartment, and I have to say I wasn’t hugely impressed. The view was ok, but the units themselves nothing extra special. I don’t think the design will age well, but that’s just my opinion.

Sorry Kingston Foreshore I was talking about if thats what you mean by waterfront

I think the waterfront site so far looks shit and very sterile. There something about it that makes it all look a bit depressing im not sure what it is but it doesn’t do it for me.

The size of the building is certainly remarkable, and “unbelievable” can go both ways.


do you think if independant described the development as anything other than “unbelievably outstanding” and “remarkable” that they’d have interest.

“come look at out new appartments, they are quite average, have crappy appointments and have no views to speak of”. That to me sounds like a sure fire marketing strategy.

Cheers pjreggard – I’ll check it out.

The reason I like the inner city is because some apartments can be leased on a long term basis to the serviced apartment market. My current properties are set up this way, and work very well.

That said, if a 3-4 bedroom house will return the numbers I’m after, I’ll definitely be checking it out.

Can some one tell me whats so good about the Metropolitan development.

On the Independent website they describe it as “unbelievably outstanding” and “remarkable”

I just can’t wait to get back to Canberra and have a look it must be a once in a life time opportunity hehehe

VY Belina, If I were you I wouldn’t be purchasing an inner city unit for investment purposes. While rents for these places will rise the massive supply will mean they wont rise as much as 3-4 bed houses. A better yield (and similar capital growth) would be achieved by investing the same amount in a dowdy house in tuggers/belco to be rented to a crowd of PS grads. It is the house market where rents will rise fastest and hardest – just ask any clued in agent 😉

Comment by VYBerlinaV8 —

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Absent Diane4:27 pm 12 Dec 06

silly song lyrics… nothing anyone has is really theirs unless it is physically attached to them. So my arms are mine, likewise my legs, feet and genitalia. I can define that.

Just listening to some Dido at work…
“If my life is for rent, and I don’t learn to buy, well I deserve nothing more than I get, ’cause nothing I have is truly mine…”

Commonwealth Bank has 110% loans, which we needed as it is pretty hard to save the legal costs let alone a deposit when you have kids and are paying the sort of rent we pay.
We lodge our house plans next week, and I can’t wait to get out from under arsehole real estate agents that treat tenants like crap no matter how well you look after a place…(yes Maloneys I’m talking about you…)

“VY and shauno … you are right, I could move to Queanbeyan. Probably my only real option. But who really wants to live there?!”

Queanbeyan is God’s Country.
A beautiful place full of beautiful people.

I grew up in Queanbeyan and found it to be a bit of a dump, but it is much improved now on what it used to be. Either way, a start’s a start.

Extended family option is good. Grandparents, parents, me and Mrs Hasdrubahl, kids…all living together and one big happy family. Only have to buy one Christmas tree, too.

I don’t know if I can say this in a public forum,
But anyone thinking of buying a house, don’t go to Oz Property Law.
They are really hopeless and unreliable and even though there “package” price is cheap they ended up costing me over a $1000 extra due to their incompetence.

A good swathe of Sydney is now actually cheaper to buy in than Canberra. Luckily for me I have skills that are portable, so I’ll be pulling up stumps in a couple of years and buying elsewhere.

Remember the first home owners grant of $7000, when that was announced the price of houses increased almost overnight by – you guessed it $7000 but unfortunatly the bad news it didnt stop there and prices kept on increasing at an alarming rate and coupled with tax concessions to property investors and banks increasing their capacity to finance loans by on borrowing extra billions from huge overseas merchant banks we have a housing bubble built on overseas finance, I dont think it will burst but will linger around and make life very difficult for some sections of society.

As has been mentioned before, plenty of lenders these days offer deposit-free loans. If you can show a lender you have a fairly long, fairly consistent rent (and other bill) history that is enough, as it demonstrates to the lender a capacity for making regular payments. And really, if you’re not too picky about the kind of home you want, loan repayments do not necessarily have to be more than rent payments.

Deposits worked well in the past, when young people lived with parents until they got married, and worked from a young age, saving heaps in the process, then could buy a home straight away with minimum fuss. Cheap house prices and generous relatives of course helped. But these days unless you still live with parents and don’t pay for rent saving for a deposit really is difficult–which is why no-deposit loans are the way of the future, especially in overpriced markets like Sydney.

So biogaz78…

You actually now have 2 options then.

1. “lower” your ideal living environment and buy in QBN.
2. keep paying rent wondering where the hell you are going to find the money to buy in your ‘ideal’ environment.

We all start somewhere and that generally isn’t were we want to be but a start is still a start.

Bio, if you can’t bring yourself to live in somewhere like Queanbeyan you obviously don’t want your own home badly enough. That is your choice and fair enough, but don’t dismiss the efforts that others have gone to to purchase their first home by calling it ‘luck’.



option 4, buy, get in a tenant or two in the other bedrooms to help aleviate the cost of mortgage. You’d probably find the remaining component about what you would have paid in rent anyway.

Absent Diane1:50 pm 12 Dec 06

owning is overated. Having debt is ridiculous. I am debt free and consequently stress free.

I know it sounds feral but I hate how moneycentric life is.

VY and shauno … you are right, I could move to Queanbeyan. Probably my only real option. But who really wants to live there?!

Option 2 – Buy with someone else. That would actually require knowing someone else to buy with. No partner. Parents live in Adelaide and still have their own mortgage. Friends also in Adelaide and too irresponsible to consider sharing a mortgage with.

Option 3 – move somewhere else. That would require trying to get a job somewhere else and considering I moved to ACT specifically for work it would kind of defeat the whole purpose i moved here.

But life goes on … I guess not everyone should expect to own there own home.

just choices..

I have to say it does kinda bug me when people say “oh, your so lucky to own your own home”
I think, oh, it was just luck that I have worked 7 days for the last 2 years to save up a deposit and start paying it off. I thought it was a decision I made while they decided to spend their money on designer clothes.
My same friends will still be bitching about house prices when we are 30 and I will have paid off mine by then. They’ll be saying “You are so lucky not to be in debt” and I’ll wonder again, was it luck? I think not.

biogaz78 If your frozen out of this market then move to a market that your not. Thats if your able to some times these choices in life just have to be made. And honestly there are cheaper places especially in QYBN you could get a place there for under 200k just to get you in the market.

There is plenty of choice around – but unless you save a deposit, you can’t really expect to be able to borrow and have a lot choice.

Instead of fretting, Bio, you could consider other options:
1) Buy in Queanbeyan – you don’t have to live there forever, but there’s plenty of cheap properties available
2) Buy with someone else – a partner, parent, friend, etc
3) Reevaluate in what and where you want to live.

It’s worth remembering that it’s entirely possible to live in a place you bought for a couple of years, then rent it to someone else to help fund your next house. It requires thinking and discipline, but it’s very possible.

As for being “lucky” for getting in early, my wife and I lived like paupers for 3 years to save a deposit so we could build our first home. Again, it’s just a matter of priorities.

Ultimately, the decision is yours – you can bitch and moan, or do something about it.

I don’t know what all the fuss is about with the housing prices. I am a single and had no probs at all borrowing $250K with a $20K deposit to buy a house. This was only six months ago. I had plenty of choice and got a 3 br, garage, back yard, townhouse with plenty of other bonuses. prices haven’t changed much since then.

Good for you VY! You’re lucky that you were able to enter the property market before the big boom of 5 years ago. For those of us who were not in a position to buy property back then we are effectively frozen out of the market.

Especially as a single, even if you wanted to borrow up to the hilt (100%) you cant even borrow the amount of money you need to get a place in the ACT.

Take a quick look at allhomes.com and you will find about 22 2+bed properties in the whole ACT for under $250k … of which about 12 are under offer, and some of the others are currently tenanted. Doesnt leave much choice does it?!

Looks like Stanhope is using some very suspect figures to spruke the housing affordability here in the ACT.

By his figures the avg. salary in the ACT per household is approx. $110,000! And I am assuming this is after tax, since thats the amount that is available for mortgage repayments.

The fact of the matter is it is extremely expensive to rent in the ACT, which in turn makes saving a deposit for a home loan nigh impossible.

I am currently paying $290/week rent as a single, but I fully expect that the owners will increase it to $300 or $310 within the next couple of months and they know full well that I cant do anything about it … if I dont like it, they will be able to get someone else to fill the rather expenisve void at the drop of a hat!

Most of the really expensive apartments ($700k +) are owner occupied, as the rental market hasn’t really been tested much past that point in Canberra yet. There are plenty of investors in units in the $300-500K range, which correlates to the types of units people want to rent.

The issue is that most people want everything now, including a nice place to live. This is the demand that drives rentals. And yes, it impacts the few who are are happy to do things more slowly.

It is possible to get zero deposit loans, and there are many financing options. If rent is too high for people, I’d encourage people to buy. As an property investor, I don’t think the market is going to “drop” – as many taxi drivers will tell you (if you can get one to pick you up). What we are in for is a substantial period of property value stagnation (little or no change in prices), until everything else catches up, just like before the last property boom, and the one before that. So to fearful masses: buying a property won’t automatically lose money.

The rental market in Canberra has nowhere to go but up. Earlier this year I read articles in Australian Property Investor identifying Canberra as being predicted for rental growth in excess of 40% between 2006 and 2010.

In other news, I am about to buy another inner city unit.

If the situation really is that dire it could start impacting (negatively) on employment in the ACT.

I really wonder about all this. Because really there are heaps for sale and also why has it taken so long for the Kingston foreshore to develop. Another thing look at all the apartments for sale in Blackall st Barton.

So I think yes there has to be something to say for the argument that investors are leaving the market. So the ones for sale are off the rental market and are being bought up by owner occupiers

having said that, the average household size is also decreasing. so that could account for who’s living in them

actually i heard a rumor that a real estate agency get all of the big apartment releases by telling the builders that they can sell a number before they are even built. naturally this appeals to builders becuase they dont need to outlay as much up front. The real estate agency then put up hte money at a really good rate and get all of their agents to buy them, thus locking in the deal. All based on idle speculation and rumor of course. I have nothing at all to back this up but i could account for who is buying them.

That’s right, JB; which is why I posed the question.

Exactly why I want one in the city. I don’t like living out in the suburbs and I’m away all the time so I like the security of an apartment above ground level. And I’m not concerned about whether it will go up in value or not because I want it for a base in Canberra to use nothing more.

ACT Housing owns heaps of the ones at Sky Plaza.

well, that shift should be freeing up other resources…

Um, owner-occupiers?

Just because investors are fleeing the scene doesn’t mean they aren’t being snapped up by others. Units are hot preperty among first-home buyers (and also empty-nesters), you know. Not everyone wants a house out in the suburbs

If investors have left the market due to land tax, then I want to know: who OWNS all those units?

Its interesting.

I’m in the market to buy an inner city apartment in the next few months. So have been keeping a close I on whats been happening. Ive seen a lot apartments remain un sold for many months at a time and a few on my watch list have come down in price.

I’m actually renting a serviced apartment in City Plaza this break for 3 weeks to see what they are like. Very handy stager distance from the pubs lol.

Canberra is not alone when it comes to expensive rents the inner city apartments in Brisbane command some high prices as well.

If the federal labour party gets in next year which I think under Rudd is a possibility they could announce some major changes to negative gearing laws in an attempt to bring back house prices. Which are very high in this country compared to the size of our land mass.

My real estate agent told me I could increase my rent on my investment unit. I said no thanks – personally I’d rather have the good tenant I have at the same rent even though the costs of paying for the unit have gone up. But the fact is that interest rates have gone up, and other costs of owning a property have all gone up as well, and do every year ie water&sewerage, rates, land tax etc. So it is not that amazing that rent has gone up.

What makes an unscrupulous agent is the one who pockets a bung to recommend one tenant over another.

if someone offers more than the going rate do you think they should turn it down

Indeed, this is just a market economy at work. Demand drives supply, and supply drives demand.


what makes you think its the unscrupulous agent upping the rents. Firstly, arent they supposed to be working in the landlords interests? and secondly, if someone offers more than the going rate do you think they should turn it down?

Oh to only be paying $1500 rent per month…

The $355 pw that I was asked for for a pokey 2.5br townhouse with the carpet in holes in Florey was outrageous.

Those kinds of rents are the equiv of mortgage payments, yet try and save a bean to buy yourself a place when you’re paying around $1500/month for rent.

Fact is that it is desperate out there trying to secure a decent home to rent, and if I had some money I’d be building rental properties….
And it will be even worse in January when there is likely to be an further influx of people looking. Rolling up to any inspection of a property that’s been advertised on one of the websites, you are greeted with what looks like a shopping centre carpark, with dozens of people trying to secure the place/any place. Which leads to unscrupulous agents prompting people to bid up the rent.
Your best bet is to use the newspaper classifieds and look for something being done privately rather than on the web…

Really though, WHO IS LIVING IN ALL THESE NEW UNITS? I need to know!

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