Residental house rents are rising faster than inflation

Rental prices are rising up to twice as fast as inflation and that has made Australia one of the least affordable housing markets in the World.

Rental prices have been rising at more than twice the pace of inflation, a housing affordability report to be released today shows.

The report shows Australians are paying $44 a week more in real terms for a three-bedroom house than they were in June, 2001.

Research conducted by report authors, Australians for Affordable Housing, shows the national median rent for a three-bedroom house would have been $232 in the last quarter if rents had only risen with CPI. However, the national median rent for December 2006 was $276.

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The report said this rental rise represented more than 25 per cent of the average households' food budget.

"For renters, decent accommodation is difficult to find," Australians for Affordable Housing spokesman David Imber said yesterday.

"People looking to rent are being forced into auction situations, where the highest bidder wins.

"Adding to rent rise pressure is the current shortage of more than 134,000 low-cost rental properties."

The housing group consists of social services, welfare, rural and community housing groups and Anglicare.

The report said Australia had been identified as one of the least affordable housing markets in the world – with Sydney, Melbourne and Adelaide in the top 20.

Mr Imber said all governments were guilty of neglecting the housing crisis, and said the group was calling for a national affordable housing agreement.

This would include increased investment in public and community housing, reform of federal tax incentives, an increase in Commonwealth rental assistance and non-profit shared equity schemes, he said.

Economic analysis released by Labor earlier this month showed households in South Australia needed an income of almost $80,000 to afford minimum mortgage repayments on the average Adelaide home.

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First time buyer bonaza as real estate listings skyrocket

Real estate listings in Sydney have skyrocketed as property investors cash in their housing assets, preparing to pump the funds into superannuation and take advantage of recent tax laws changes.
The number of properties coming onto the market in Sydney and in January rose by 100 per cent and 200 per cent in Sydney and its regions, figures from property group Raine & Horne offices show.
In many areas, the flood of listings reflects transitional changes to superannuation, which allow up to $1 million in after-tax contributions to be made prior to July 1, 2007.
Proprietor of Raine & Horne Newtown, Ben Treweeke, in Sydney's inner west said the changes are having real impact on the property market in the area.
"We've sold a lot of management properties for people who are moving their money into superannuation," he said.
"Indeed rent rolls across the board are relatively static because every time we take on a new management property, were also selling one."
Under the Federal Government's new super regulations, money received from a taxed super fund will be tax-free for people over the age of 60, making it the most tax-effective investment for retirement.
At present, money is taxed when put into a fund, while within a fund, and generally when withdrawn.
But once the new laws are in place, an individual will be limited to investments totalling $150,000 a year or a maximum $450,000 within a three-year period.
Mr Treweeke believes the shift to super can also be partly attributed to low rental yields.
The Real Estate Institute of Australia (REIA) said the supply of rental property is tight because of investor selling to take advantage of other investment opportunities like super.
However, with rental returns now improving due to tight supply of rentable property investor interest in property could be reignited.
"Increases in rents are not just a market response to tight vacancy rates, but also to yields," REIA president Graham Joyce said.
"It has been suggested that this is a one-off event and will ease after June."
However, given that investors will be able to shift up to $450,000 within a three year period into super after June, the REIA predicts that the sell-off of residential investment property will continue.
So will the market continue to be flooded in coming months?
Chief executive officer of Raine & Horne, Angus Raine, thinks not.
"There will not be a flood by any means," he said.
About 85 per cent of property owners hold one property, meaning there's only a small percentage of property owners that will have the capital to put into super.
"This selling is going to free the market up ... and really bring down the ceiling for first time home buyers," he said.
Mr Raine said the availability of property in Sydney areas such as Bondi Beach, Bondi Junction and Potts Point - traditional investor areas - is increasing.
In Sydney's north, Raine & Horne salesman David Hill says there are more investors selling than homeowners, with one and two bedroom apartments in the $350,000 to $500,000 range being snapped up by first homebuyers.
Mr Raine said the unprecedented rise in listings could dampen property prices temporarily.
But it could also fuel the rental crisis further by reducing the stock of rental homes available, because the majority are being purchased by owner occupiers.
Source: AAP

Housing shortage puts more pressure on Australia's poor

More and more low-income Australians are enduring living standards typical of the Third World — with many forgoing basic necessities including food and health care — in order to meet the increasing cost of rents and mortgages.
Research undertaken by Swinburne University for the Australian Housing and Urban Research Institute last year, and released yesterday, found that 27 per cent of people who spent 40 per cent or more of their income on rent had reported that their families had sometimes gone without meals.
The institute surveyed 1735 renters and 407 home purchasers across Victoria, NSW and Queensland, and asked what impact the housing affordability problem was having on their ability to pay for basic items such as bills, food and health care.
It found that as people spent a higher percentage of income on rent or home repayments, the impacts were more severe. The most common effect reported by those spending 40 per cent or more of income on rent was that they were sometimes unable to heat or cool their homes. Almost 60 per cent of this group made those reports.
According to the National Centre for Social and Economic Modelling, 1.2 million Australians — or 15 per cent of Australians — are in "housing stress". About 613,000 of those people, or 52 per cent, are renters.
The Housing and Urban Research Institute said 44.2 per cent of people in housing stress said they felt trapped in an area with poor job prospects, while 42.4 per cent said their children had missed out on school activities such as sports and excursions and 39 per cent said their children had to go without adequate health and dental care.
Almost 33 per cent reported that they had turned to welfare or counselling agencies for help.
The report also found that about 43 per cent of low-income renter households surveyed had been in arrears on rents at some stage over the previous three years and 71 per cent had some problem paying their rents.
Swinburne University researcher Terry Burke said the housing affordability problem was resulting in practices that "we might expect in Third World countries".
In a speech to be delivered at a housing conference in Melbourne on Thursday, Professor Burke says Australia's economic prosperity — and the corresponding growth in people's wealth — has disguised hardship that many lower-income households face.
Professor Burke, from the university's Institute for Social Research, said people including singles, sole parents and young people were going without meals, selling or pawning possessions to survive financially, or forgoing adequate dental or health care.
"It is clear that the benefits of growth are not being shared fairly or are being eroded by housing market processes," he said.
The housing industry has previously warned that the number of homeless Australians could rise, because households will be forced to spend a greater percentage of their income on rent and mortgage repayments.
Professor Burke said the Federal Government needed to introduce policies to increase housing stock.
"We need to target more negative-geared incentives at the lower end of the market," Professor Burke told The Age.
"For example, we could restructure negative gearing for property so there is a 120 per cent tax deduction for construction of properties under $300,000."
He also called for Commonwealth rent assistance to be increased. Prime Minister John Howard last month said he was examining what kind of assistance could be offered to struggling renters.
Professor Burke said Reserve Bank governor Glenn Stevens has said that while the rental market is tight, it is simply catching up with increases in house prices. Bureau of Statistics figures show rents rose 3.7 per cent last year, the fastest pace since 1991.
But Professor Burke said he hoped that rental prices would not rise any further, because the impact would be devastating. He said he did not believe predictions that the cost of housing will increase by 30 or 40 per cent.
"People just don't have the income to absorb those rent increases," he said. "They will instead adapt various behaviour (such as) moving to areas of cheaper accommodation, which may erode job prospects, not leaving home until a much later age or, at the extreme, homelessness."
He said rather than the problem being new, it was "an enduring problem" evident for some years. "I think we hear more about it now because rent increases are now affecting young professionals who are beginning to complain about their ability to afford rents, particularly in the inner city area."
Shadow Treasurer Wayne Swan said there had been "a clear lack of national leadership" in addressing the housing affordability crisis.
Source: The Age