Finance Finance News Soaring rents add insult to injury in housing affordability crisis

Soaring rents add insult to injury in housing affordability crisis

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Rent prices are increasing about three times faster than wages. Photo: TND
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Rising house prices aren’t the only thing making it harder to save for a deposit: Weekly rents are also skyrocketing while wages stagnate.

Median national house rents are $18 higher than this time last year, a 4 per cent jump since the pandemic, according to new Domain data.

It means weekly rent offers are now increasing about three times faster than wages – a budget squeeze that’s pushing home ownership further out of reach for Australians trying to save for a mortgage.

“It’s really tough for renters to save for a deposit when faced with rapidly rising rents,” Domain senior research analyst Nicola Powell told The New Daily.

House rents are now rising at their fastest pace in more than a decade in Brisbane and Adelaide, and at their fastest since 2013 in Perth.

That’s because Australians leaving the big cities after the pandemic are driving up demand for rental properties in markets already restricted by limited supply, Dr Powell said.

But these shifts, coupled with a collapse in migration, are having the opposite effect on house rents in Melbourne, which have actually fallen 2.3 per cent since last March.

In a stunning turn, Melbourne has emerged from the pandemic as the second most affordable city for house renters, tied with Perth.

Indeed APAC economist Callam Pickering said that’s unlikely to last.

“What we’re seeing in a lot of this rental data right now is that there’s probably something a bit temporary about it,” Mr Pickering told TND.

“It remains really difficult to save for a deposit if you’re also renting. That’s as clear today as it’s ever been.”

Mr Pickering doesn’t expect rents to continue increasing at their current pace, because wages growth can’t support ongoing increases.

In fact, the ABS’ measure of rent prices – a broader measure that includes existing leases – has actually fallen 1.3 per cent over 2020.

Mr Pickering said Domain’s data on new lease prices suggests landlords have been trying to cash in on improvements to household budgets caused by JobKeeper.

“Household incomes last year rose at their fastest pace in a decade due to JobKeeper and other support measures,” he said, referring to ABS data.

“Some landlords might be trying to leverage that temporary windfall to boost their rental yields.”

The outlook for unit rents in Melbourne and Sydney is also more positive for tenants, Dr Powell said.

Unit outlook more positive for renters

The median unit rent price has fallen 8.1 per cent to $429 since the beginning of the pandemic last March – a whopping decline of $38 per week.

That’s because unit prices were hit particularly hard last year as people moved out of city areas and into houses in the suburbs and regions.

Median unit rents were down 12.8 per cent year on year in the March quarter, and also fell 9.6 per cent across Sydney in annual terms.

Unit rent prices across Melbourne and Sydney are likely to remain subdued until international students return to Australia.

But unit rents did rise 14.1 per cent in Perth in annual terms, and 9.4 per cent in Adelaide.

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