Rents Set To Soar

CHRIS ZAPPONE
January 13, 2010 – 9:35AM

The Age

Renters should prepare to pay more this year, as landlords pass on the costs of interest rate rises and tax increases to tenants, a research group says.

Expectations of steeper rent charges follow a flat quarter of rental growth for houses in eastern states, according to Australian Property Monitors.

The median weekly asking rents for houses in Melbourne, Sydney, Brisbane and Hobart were unchanged in the December quarter, the property research group said.

But December “is likely to be the last quarter of flat rental growth,” APM economist Matthew Bell said.

“Melbourne rents should resume their long-term upward trend and are expected to rise by to 5 per cent to 7 per cent, in line with their long-term growth rate,” Mr Bell said.

“Sydney rents are likely to increase by at least double the 2009 rate of 2.2 per cent to approach the $500 per week level for houses.”

Property markets in Brisbane and Perth would play “catch up” with Sydney and Melbourne, APM predicted, with median house rents in Perth forecast to hit $400, a jump of 11 per cent. APM is owned by Fairfax, publisher of this website.

“Brisbane rents, coming off the same base of $360 as Perth, are also likely to approach $400 with an expected growth rate closer to 8 per cent,” Mr Bell said.

The Reserve Bank raised the official cash rate three months in a row at the end of 2009, taking the rate to 3.75 per cent.

But more rate hikes are expected from the RBA, with another rise tipped by markets next month.

“An improving employment outlook means that overall, renters will be more willing and able to afford rental increases,” Mr Bell said.

The unemployment rate sank to 5.7 per cent in November, leading economists to speculate that the worst is over in the job market.

Also, the end of the First Home Owner Boost in December has removed a key incentive aimed at helping turn renters to owners.

House prices continue to climb, putting ownership out of reach for more people, Mr Bell said, with little relief expected.

Home loan data released yesterday by the Australian Bureau of Statistics showed that investment in housing rose only 2.1 per cent in November, while total new home loans fell by 5.6 per cent in the month.