Rent Confusion

If you’re confused about what’s happening with rents in Australia, you can be forgiven.

 

That’s especially so if you use news media as your main source of information about residential real estate.

 

The information – or perhaps more correctly, misinformation – in news media is highly confusing and in many cases contradictory, with one headline saying the complete opposite to another.

 

Here are two headlines that appeared on the same day, the 10th of January:

 

The worst is over: slowest rise in rents in four years

Affordability crisis: tenants feel the pinch as rents surge

 

So, as usual, Australian real estate consumers need to look elsewhere, somewhere other than mainstream media, to find out what’s really happening in housing markets.

 

One of the strange things about residential rents, which pops up regularly in news media, is the bizarre notion that if the latest stats suggest that the rate of growth in rents is slowing, then tenants across the nation are celebrating. 

 

They’re apparently popping champagne corks because the rate of rental growth currently is less than it was last year.

 

Let’s be clear: the greatest wish of tenants is NOT slower growth in rents. It’s NOT for rents to stop growing. And contrary to the apparent belief of The Greens, they don’t want a rental cap. What they want is for rents to FALL.

 

People who rent in Australia, about a third of households, want to see a bigger choice of places to live in – in other words, they want higher vacancies. And they want rents to come down.

 

There are two main reasons why that isn’t happening and cannot happen: 

(1) because vacancies are at historic lows, as they have been now for three years, and there are no remedies in sight; and 

(2) because interest rates are persistently high and the owners of rental properties need high rents to cover their costs.

 

Having said that, it’s clear that - in some locations - rents have reached a ceiling and are unlikely to go much higher in the short term. Tenants cannot keep paying higher and higher rents – and higher and higher proportions of their incomes – on rental accommodation.

 

That is why the rate of growth in rents has slowed in SOME – but certainly not all – locations across Australia.

 

But the true wish among tenants – for rents to decline – is highly unlikely to happen any time soon.

 

SNIPPET:

 

There’s a lot of confusing and conflicting information in mainstream media about what’s happening with residential rents.

 

Some headlines have declared that the worst is over for tenants because the rate of growth in rents is slowing down – as a national average.

 

But other headlines have claimed that rents continue to surge higher and tenants continue to be in a world of pain.

 

The reality is that rents are still rising, although in SOME locations the rate of growth is slowing down.

 

But with vacancy rates continuing to be at historic lows in most places across Australia, and interest rates stubbornly high, we don’t have the conditions for rents to fall any time soon – particularly as there are no solutions in sight for the shortage which is causing rents to be high and rising.