In a landlord’s market, tenants face a double whammy: slim pickings in property and a rent hike this year, reports Maurice Dunlevy.

Rental Facts

The good times roll on for landlords, but spare a thought for their hapless tenants. That’s because the flip-side to Australia’s lowest residential vacancy rates in two decades is an expected 15 per cent rent hike during the course of 2008 as investors cash in on near-record rental property shortages, and pass on their higher borrowing costs.
And paying more isn’t the only big issue confronting Australian renters.
A bigger challenge could be finding a roof to put over their heads in stock-starved rental markets where recent official and unofficial interest rate hikes and 5 per sent gross yields have done little to restore investor confidence that’s been in short supply since the 2004 housing collapse.
In Queensland alone, 30 per cent of all new apartment projects were abandoned last year on the back of poor pre-sales and tougher developer lending criteria, so it’s no accident that landlords are doing bests in Brisbane.
Strong interstate migration and a booming jobs market have led to Queensland’s shortfall.
In Brisbane, tenants attempt to stave off rent rises, with longer leases. Brisbane’s current average residential lease term is only 13 months, but according to Matusik, in Brisbane and other capital cities there has already been a move to commercial-type leases where residential tenants sign for two years, but potentially stay for four through two-year options.
Such leases commonly contain rises fixed at plus 6%.
“Real estate agents don’t like it because they make money from changing tenants, but investors do because they like secure tenancies and are willing to trade off returns to get them.”
Matusik says recent research indicates Brisbane now has one of the tightest markets for rental accommodation in Australia.
A 2007 study in an already tightening inner-Brisbane market found 59 per cent of rental properties had one or more spare bedrooms, which is the type of shared accommodation popular with singles wanting to live close to where they work in the CBD.
A year on, and a 10 per cent rent rise later, there are virtually no empty bedrooms in inner Brisbane, particularly around railway stations, a situation with dire consequences for renters, according to Matusik.
With rental vacancies now down to 1.5 per cent, he sees no let-up either this year or next, with likely rent rises of at least 15 per cent, and possibly more.
After a decade of limited rental growth, Matusik believes tenants have the capacity to pay more. Like other experts, Matusik blames Brisbane’s rental crisis on a 20 per cent shortfall in the number of new homes being built across Queensland.
Robert Mellor, managing director of economic researcher BIS Shrapnel, predicts significant social changes from the housing shortfall.
“We’re going to continue to see a higher proportion of young people living at home with their parents, or in group households, because they cant afford to pay higher rents,” he says.
“Basically we haven’t built enough homes since 2004 and, since then, it’s been a shuffling of the deck chairs.”
Nevertheless, over the next 18 months, BIS Shrapnel predicts no change to the number of new houses and units in Queensland.

With Turi Condon.

Ask Peter 0418 774 663
peter@petercampbellrealty.com

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