Rentals – Page 2 – Digital Finance Analytics (DFA) Blog

How renting can fix the UK’s broken housing market

How to fix the UK’s housing crisis has been the subject of national debate for decades. Universal home ownership is a popular goal, which successive governments have failed to achieve. This is largely because they have been faced with the paradox of increasing the supply of affordable housing while not encouraging house prices to fall, as this is widely regarded as political suicide.

One solution has been to promote policies that make it easier to get a mortgage or boost disposable income so that it rises faster than house prices. In fact, nearly ten years after a global financial crisis caused by the ready availability of mortgages to households with no ability to repay them, the UK government maintains its “Help to Buy” initiatives. These focus on helping people to borrow the large sums necessary to pay for unaffordable homes.

What has been missing from the debate is the role that renting can play in solving the UK’s housing problems. The government’s latest white paper is significant in that it features policies to help renters. But ownership remains the ultimate goal.

In the UK there is social and political pressure for people to “get a foot on the housing ladder” – even when, in many cases, it is financially preferable for households to rent. Although the benefits of home ownership are many, one should ask whether it is wise for governments to encourage – and subsidise – people to take on debt that they would otherwise not be able to afford, in order for them to place all of their financial resources into an asset that may be overvalued or unsuitable.
Must you get on the ladder? shutterstock.com
Eggs in one basket

One of the most basic rules of investment is “don’t put all your eggs in one basket”. Yet most households do just that when they buy a home and then they leverage this investment by borrowing money.

This is much riskier than placing all of your money in a fund that tracks the global stock market. Not only is it difficult to sell a house when you urgently need the money, if house prices fall – even by a not unusual 10% – your losses will be multiplied by the gearing effect of the mortgage. For example, if all of your savings amount to £20,000 and you use this as a 10% deposit to buy a £200,000 home, then you borrow the remaining £180,000, a 10% price fall will leave you with no savings and owing money to the bank if you then try to sell.

For previous generations, from the late 1970s onwards, the risk of homeownership has paid a commensurately high return because inflation has been generally positive but benign. And, at the same time, interest rates have trended down from double digits towards zero.

For those contemplating buying their first home today, however, the outlook for both interest rates and inflation is more uncertain. For example, Japan and more recently some eurozone countries have experienced prolonged periods of deflation. In the UK, despite efforts to keep inflation positive, actual realised inflation has been consistently below the Bank of England’s forecasts from the second quarter of 2013 until January.
Don’t bet on inexorable rises. shutterstock.com
House prices vary substantially over time relative to both GDP and household income – confirming that housing is a risky investment. Furthermore, in markets where building land is in short supply (such as Japan and many parts of the UK), this variability is greater than in markets such as the US where it is more readily available to meet demand.

When renting is better

In a recent paper I demonstrate that renting can be a better financial option than buying in a number of circumstances. These include: if you do not plan to live in the same house for at least five to ten years; or if inflation is negative (deflation); or if the net rent saved by owning is less than your mortgage interest or the return you could have achieved by putting your money in other investments with a similar level of risk.

This is because rent typically includes substantial ownership costs such as building insurance, property maintenance and furnishing. So the money saved by owning a house is considerably less than the rent not paid. Another reason is that buying and selling houses incurs substantial transaction costs in the form of legal fees, transaction tax (stamp duty) and selling agents’ fees. These are much higher than rental transaction costs. So unless you plan to stay in the new home for a considerable time, the chances are that these higher costs will not be recouped by savings from rent or price appreciation.

Plus, although prices have tended to drift up in the long term, prices can and do fluctuate substantially in the medium term (five to ten years). So if you plan to relocate within a few years there is a greater risk of being unlucky in your timing and suffering a price loss.

Finally, purchasing a home fixes your housing costs and often incurs a substantial mortgage liability. This is good if prices and wages are generally rising – because the mortgage payments become more affordable as incomes rise. But, in a world of low inflation or deflation, mortgage liabilities remain fixed, but incomes, prices and rents tend to decline making it harder to sustain mortgage payments and harder to recoup the capital invested in buying.

There are many ways that governments can influence the affordability of housing besides helping financially constrained households to concentrate all of their savings into risky assets that they would not otherwise be able to afford. Allowing house prices to drop will always be politically difficult – homeowners tend to make up the bulk of the electorate that turns out to vote. But they could do much more to encourage renting, even if it does require a radical rethink in the British mindset when it comes to home ownership.

Author: Isaac Tabner, Senior Lecturer in Finance, Director of the MSc in Finance, University of Stirling

RBA FOI On Australian Metro Apartment Vacancy Rates Highlights Risks

The RBA has release an FOI response relating to documents created since 1 July 2015 containing information on Australian metropolitan apartment vacancy rates.

They say that a first look at the data indicates that the large additions to supply may be weighing on the apartment markets in inner-city Brisbane and Melbourne. It also highlights the strength of current conditions in the Sydney apartment market, whereas Perth and areas heavily exposed to the mining industry are experiencing some weakness in housing markets

The substantial volume of apartment construction currently taking place across Australia has been concentrated in Sydney, Melbourne and Brisbane. The large amount of expected apartment completions over the coming years has led to concerns around potential oversupply, particularly in the inner-city areas of Brisbane and Melbourne. By number, these 3 city’s CBDs are forecast to have the largest amount of apartment completions over the coming two years As a share of the existing stock, the new forecast supply in Brisbane CBD will increase the dwelling stock in that area by 25 per cent. Adjacent areas to the Brisbane CBD, such as Brisbane Inner – North, and Holland Park – Yeronga are also forecast to have substantial increases in supply.

In Melbourne, the total number of new units is estimated at over 16 000 over the next two years, well above the forecast increase in other areas and as in Brisbane, neighbouring areas such as Port Phillip are also expected to have large numbers of new units.

Liaison suggests developers will increasingly offer rental guarantees as apartment supply increases (as a way of securing investor sales) and will be quick to adjust rents in response to vacancies. This raises the risk that a ‘flight to quality’ will translate to the broader apartment market over time through softer demand for older low quality, low amenity apartments.

In Sydney, the areas forecast to have large numbers of new units are more geographically dispersed and the proportional increase to the dwelling stock is generally smaller than for Melbourne and Brisbane. The dataset provides information about market conditions at a more granular level. For example, CBD apartment market conditions differ markedly across cities; the weakness in the Perth economy has led to sizeable declines in apartment values and rents as well as elevated vacancy rates, Brisbane and Melbourne’s apartment market conditions are subdued, while Sydney’s remains strong.

For Greater Sydney, expected apartment completions are higher than in the other capital cities. But oversupply is less of a concern, because this expected supply forms a lower share of the dwelling stock and is relatively spread out across the inner and middle suburbs. For those areas within Sydney forecast to experience larger increases in supply relative to the existing dwelling stock, (such as Strathfield – Burwood – Ashfield, Parramatta, Ryde – Hunters Hill and Auburn), there is little sign that oversupply concerns are weighing on these areas, with both value and rental growth remaining relatively strong However, in Melbourne and Brisbane, value growth in areas with the largest amount of expected completions (such as Melbourne City and Brisbane Inner) is relatively weak.

In Darwin, the housing market faces major headwinds as population growth slows. Contacts reported that high-density housing is oversupplied after years of strong building activity, which has led to falls in rents and prices and a rise in vacancy rates. High-rise construction has fallen significantly and building companies have had to adapt by rapidly shedding staff.

Apartment vacancy rates are already the highest of any capital city and residential rents have fallen considerably “white collar” workers – such as in engineering and design – do rent apartments. These highly-paid workers are either leaving now or have already left, which could partially explain the high vacancy rates already in Darwin. The decrease in accommodation costs resulted in Darwin’s CPI growth falling to around 0 per cent in year-ended terms in June 2016.

Can the private rental sector provide a secure, affordable housing solution?

From The Conversation.

Despite a relatively healthy supply-side picture for the general housing market, the expected trickle down of housing opportunities to low-income households in Australia has failed to materialise.

The UK Department for Communities and Local Government boasted this year of a seven-year high in construction starting on new houses; in the 12 months to December 2015, there were a little over 143,500 housing starts. With a population of 54.3 million, the English housing sector is adding one new dwelling for every 380 persons.

Over the same period there were 231,411 housing approvals in Australia. With a population of 23.5 million in 2014, the Australian housing sector is adding one new dwelling for every 102 persons.

The supply of new housing has matched Australian population growth in recent times. The figure below profiles growth of the housing stock between 2006 and 2014, and compares it to population growth over the same period Australia-wide, as well as across the state capitals, Canberra and Darwin.

Growth in the national housing stock has kept pace with population growth for almost a decade.

However, the picture differs across state and territory capitals. In Perth and Sydney, increases in the housing stock are insufficient to match the increase in these state capitals’ populations. But there are different patterns underlying this common outcome.

In Perth, population growth was exceptionally strong. It was faster than any other city: its population soared (by 2014) to more than 28% above 2006 levels. Such rapid growth would stretch the capacity of most housing construction sectors, even in the absence of any supply-side impediments.

Sydney’s population growth (at 14%) is below the average across all cities (17%). Despite this relatively low increase in its population, housing supply failed to produce a matching increase in the housing stock.

A housing system under pressure

The balance between growth in population and expansion in housing stock through new housing supply is thought to be relevant to an understanding of housing affordability pressures. New housing construction that matches population growth should ease price and rent pressures, where all else is equal.

Although most new housing is built and sold in the higher price ranges and therefore purchased by higher-income groups, the housing they vacate will fall in price. It therefore becomes accessible to middle-income groups. And, as they shift upmarket, the housing they move out of falls in price and becomes accessible to lower-income households.

Eventually, this filtering process opens up new opportunities for the homeless.

Housing affordability is generally thought to be worsening, especially for low-income households. Homelessness numbers remain stubbornly high. And official figures for June 2015 reveal there were 154,000 households on state housing authority waiting lists for public housing.

It is likely that the length of these waiting lists underestimates the need for public housing. We have modelled the income rules determining eligibility for public housing, and estimate that there are nearly 900,000 households satisfying these income eligibility criteria.

More than two-thirds of these households (650,000) contain one or more persons who:

are aged 65 and over;

have a long-term health condition or disability; or

have children aged under 15.

These are people who value the security of tenure that has typically been offered by public housing, but who are unlikely to be able to buy their own homes. There are nearly 1 million individuals in these households – a group that is currently ill-served by Australia’s housing system.

Housing solutions through private-public partnerships

The need for new housing solutions for these low-income groups is clearly a pressing requirement. However, raising the capital funding to expand public or social housing to meet their housing needs seems improbable.

Secure leasing is a private-public partnership option that offers a rent premium to those private landlords willing to offer long-term leases to those satisfying the income tests for public housing. They would also be either of pension age, disabled or caring for children.

In the unregulated Australian rental housing market, leases are almost always short term. This gives landlords the option to realise investments in the near term. Hence, a long-term lease proposal requires Australian governments to offer landlords a rent premium to compensate them for the money sacrificed when they enter into a long-term arrangement.

Consider a reform scenario in which landlords are given an incentive to offer five-year secure leases to households eligible for public housing who are now living in the private rental sector, with rent increases capped at increases in the consumer price index over the secure lease period.

We estimate that, over five years, the budgetary cost to the government to house these 650,000 households in secure lease arrangements is A$13.4 billion.

The uneven distribution of these households across states and territories means the program’s cost varies across the five most-populous states. Our estimates are $4.7 billion in New South Wales, $3 billion in Victoria, $2.5 billion in Queensland, $1 billion in South Australia, and $1.8 billion in Western Australia – with the remainder borne by Tasmania and the territories.

This cost is much more affordable than the capital funding required to expand the social housing stock through the construction of new social housing dwellings.

The Australian tax system currently provides indirect support for the supply of private rental housing through tax concessions such as negative gearing and capital gains tax discounts. Is it now time to harness some of the private investment stimulated by these concessions to help improve the supply of affordable and secure housing opportunities for low-income households.

Authors: Gavin Wood, Professor of Housing, RMIT University; Rachel Ong, Deputy Director, Bankwest Curtin Economics Centre, Curtin University

Eager homebuyers still falling victim to shadowy rent-to-buy deals

From The Conversation.

Those looking to get a piece of the Australian dream of buying a home are still falling victim to the shadow property market of rent-to-buy deals, a new report shows.

In a typical rent-to-buy deal, the buyer agrees to an inflated property price, then pays market rent (or above), an “option fee” to buy the property in several years’ time, and in some cases a deposit and outgoings. The option fees are at least partly credited to the purchase price. The catch is that the buyer has to refinance with a mainstream lender to buy the home by the time the rent-to-buy deal expires.

People who have signed up to rent-to-buy deals find it virtually impossible to refinance. The Consumer Action Law Centre has seen no examples of successful rent-to-buy deals. They are extremely risky financially and the legal protections for buyers are grossly inadequate.

In vendor finance schemes, the buyer agrees to an inflated property price, then pays a deposit, instalments, outgoings and, in some cases, their First Home Owner Grant. Vendor finance agreements are typically for between two and 30 years. However, the buyer will often need to refinance within several years and will face the same obstacles as in rent-to-buy deals.

The Consumer Action Law Centre report, Fringe Dwellings: The vendor finance and rent-to-buy housing black market, collected and published 10 case studies from Victoria and beyond. The studies detail the experiences of people across Australia who have bought into these schemes. There are some striking similarities between these cases.

The sales pitch is the same – “Own a home quickly and easily”, “Buy without a bank!”, “Tell the landlord to shove it!” and so on. The dream of home ownership is a very easy sell, especially to someone who thought it was out of their reach.

There are many examples of failed vendor finance deals. Many buyers have paid significant amounts towards what they hope will be their home, only to find they cannot complete the purchase and will lose everything.

The people who fall victim to these schemes don’t have the income, savings or credit history to get a mortgage. Often the banks have said no and people are drawn in by someone who seems to understands their predicament and finally says yes.

In most cases the deals were unaffordable from the beginning. The purchase price is well in excess of market value and the repayments are much higher than you’d see in a mainstream mortgage.

How people fall into the trap

Owning your own home is at the centre of the modern Australian dream. Yet this dream is increasingly out of reach of many as housing affordability worsens with rocketing property prices in our major cities. A report published earlier this year by the Australian Population Research Institute cited international research data ranking Sydney and Melbourne as second and fourth respectively among the most unaffordable locations in the world across the 86 major markets surveyed.

So it’s no wonder that people will go to extreme lengths, and are susceptible to the seductions of smooth-talking property spruikers, as they chase the dream of home ownership.

The legal framework is almost impossible for an individual to navigate without expert advice. In Victoria alone, there are nine pieces of state and federal legislation that can apply to rent-to-buy and/or vendor finance arrangements.

Although the various deals are sold to buyers in much the same way, it’s when they unravel that the complicated nature of the deals comes to light. This is essentially a black market, because it does not sit within established property markets or laws.

How common is this in Australia?

Such schemes have a long history in Australia and elsewhere but have achieved somewhat of a renaissance with the rise of the people who promote these schemes.

Unfortunately, it is difficult to identify how many people have entered into these sorts of schemes due to a lack of available data. Answers to questions in the census also do not provide this information. For the most part, therefore, these transactions are invisible.

As the property has not changed hands, there is no record on the title to the land and consumers rarely register caveats. However, the Consumer Action Law Centre and other legal services around Australia have assisted clients regarding these schemes in recent years.

In addition to this, there is an unhealthy level of interest in getting involved in these schemes. Thousands of potential brokers have attended vendor finance and rent-to-buy promotions in Australia. We Buy Houses Pty Ltd, the biggest of the operators, had a turnover of $20 million between January 2011 and June 2014. The role that some lawyers play in the establishment of the schemes is another concern.

People who use the rent-to-buy schemes may or may not fall under the protection of the law. Dan Peled/AAP

What can be done?

These schemes operate in a legal twilight zone. The patchwork of state and federal laws does not adequately regulate these transactions.

Depending on the structure of the particular transaction and the jurisdiction in which it occurs, some consumers may qualify for some legal protection while others simply fall through the cracks. Given the already onerous financial and emotional burdens incurred, consumers may recoil at the prospect of further expense and stress through engagement with the legal system.

Obviously the best course is to discourage consumers from entering into these transactions in the first place, so more public awareness of the pitfalls is desirable. The reality is, however, that the tantalising prospect of home ownership will mean that many hopeful but vulnerable homebuyers will still enter into these transactions. Proactive legal intervention is necessary and urgent.

As suggested by the Consumer Action Law Centre, the most effective solution would be to prohibit such schemes. Their track record in Australia and elsewhere is poor. The only benefit flows to the broker.

Failing this, property investment advice should be more tightly regulated.

The Corporations Act and the Australian Securities and Investments Commission Act impose tight regulations upon other forms of financial advice and all of these transactions should be no exception. Also purveyors should be licensed under the national credit laws to ensure compliance with national standards and make sanctions available for non-compliance.

These measures are essential to ensure that advice provided complies with existing regulation, that consumers are aware of the pitfalls of the schemes and that an especially vulnerable cohort of consumers is protected.

Another concern is the coverage of existing national and state laws. It is ironic that, in many cases, these transactions do not fall under the national credit law, the cornerstone of responsible lending and protection from unjust contracts.

State legislatures, which have carriage of real property laws, also have a role to play. Again, depending on the the structure of the transaction, laws could potentially overlap and yet other scenarios are not addressed at all.

Finally, regulators should use consumer protection laws to pursue these schemes. These laws prohibit misleading or deceptive and unconscionable conduct – although proving these legal standards before a court can be onerous.

The Consumer Action Law Centre’s suggestion of an extension of the provisions to include unfair trading – especially within the context of the ongoing review of the Australian Consumer Law – is timely.

These types of shonky schemes are not new and their shortcomings cannot be denied. The desire for a home means that many consumers will be vulnerable, especially in a time of declining home affordability and tighter credit. It seems we have reached a point where a national approach to the regulation of these transactions is not just desirable, but essential.

Authors: Eileen Webb, Associate Professor, Curtin Law School, Curtin University; Allan Fels, Professorial Fellow, University of Melbourne

Rents continue to rise despite national building boom

From Australian Broker.

Rents in most capital cities continue to rise due to an ongoing shortage of rental properties, according to the March Domain.com.au Rental Report.

Unit rents increased in Sydney, Melbourne, Brisbane, Hobart and Canberra over the March quarter, the report revealed.

Domain.com.au senior economist Dr. Andrew Wilson says rents remain at record levels despite the recent national apartment building boom intending to provide more available rental stock to capital city markets.

“Despite the recent influx of home building, we can expect to see upward pressure on both house and unit rents in most capital cities continuing in the foreseeable future.

“However, the clear exceptions to tight capital city rental markets are Perth and Darwin. Rents in these cities continue to fall reflecting the impact of the downturn in the resource economy and the end of the significant rental demand driven by a fly-in fly-out workforce.”

In Sydney, median unit rents increased sharply over the March quarter. The median unit rent was recorded at $520 per week, whilst for houses it was $530. Sydney unit rents have now increased by 4% over the past year.

Weekly median prices for houses remained unchanged over the March quarter, however, have increased by 1.9% over the year.

“Despite the significant numbers of new apartments entering the market, Sydney unit rents bounced back this quarter with a sharp 4% increase in the median weekly rental. This increase offers no relief for tenants with house rents remaining at record highs and already low vacancy rates continuing to tighten,” Dr Wilson said.

In Melbourne, median weekly unit rentals increased to $380 over the March quarter, reflecting a 4.1% annual increase – the highest unit rental growth rate of all capitals.

Melbourne house rents consolidated at the record $400 per week, an increase of 2.6% over the year.

“It has been a positive quarter for investors in Melbourne with unit rents now rising to record levels and vacancy rates falling, despite an unprecedented new apartment boom. Melbourne house rents remain at peak values as well, with low vacancy rates indicating no relief in sight for tenants,” Dr Wilson said.

House and unit rents in Brisbane increased by 2.5% and 2.7% respectively over the past year. In Adelaide, unit rents remained unchanged while house rents climbed by 2.9%.

House rents rose by a massive 6.1% in Hobart while unit rents rose by 1.8% over the year. In Canberra, house rents increased by 4.4% over the past year with unit rents up by 1.3%.

Rents in Perth and Darwin, however, declined over the year. The median weekly house rent fell by 11.1% in Perth and unit rents fell by 9.1%. Darwin house and unit rents also fell steeply over the past year, down 15.4% and 13.5% respectively.

Broker group launches app to shake up real estate industry

From Australian Broker.

Award-winning interstate broker group, N1 Finance, has partnered with online real estate portal, Seekahome, to create a new app to shake up the real estate market.

The DIY property renting app, Snailapp, aims to connect landlords directly with potential tenants by allowing them to create and post rental listings for free on the platform. It has also been built with a messenger service to initiate instant conversations between the tenant and landlord.

According to the latest census data compiled by the Australian Bureau of Statistics (ABS) in 2011, approximately 2.3 million occupied private dwellings, or 29.4%, were rented. With average weekly rents currently sitting at $483, according to data from Corelogic RP Data, and average property management fees at 5%, Ren Wong, director of N1 Finance says the market for DIY rental apps is huge.

“We know many landlords are happy with their existing property agents. This app targets those landlords looking for a quick, free and simple alternative to existing channels to source tenants. The unique selling point for the app is it facilitates communication easily between landlord and tenant as Snailapp is likely to be used by the landlord, not the agent,” Wong said.

The app has already received positive feedback, according to Wong, so he expects it to grow substantially over the coming year.

“We expect to have matched hundreds of tenants and landlords in the first 12 months and there has already been some positive feedback from current users,” he said.

“Once the platform hits scale, we believe there is a great opportunity to take on the established platforms, and this is part of our value-adding service to our existing investor clientele.”

Rental Yields Fall – CoreLogic RP Data

According to analysis from CoreLogic RP Data, rental rates across the combined capital cities increased by 0.1% in April and continue to rise at their slowest annual pace in more than a decade. While rental rates tell part of the story, it is also important to consider rental yields. Rental yields for houses and units are sitting at their lowest level since late 2010. There is a reason for the disconnect between rising house prices and rents. That is simply because rents are more directly linked to average incomes than home values. As we reported recently, income growth is slowing.

Across the combined capital cities, gross rental yields are recorded at 3.6% for houses and 4.5% for units. At the same time in 2014, gross rental yields were recorded at 3.8% for houses and 4.6% for units. Across the individual capital cities, house rental yields are lowest in Melbourne (3.2%) and Sydney (3.4%) and highest in Darwin (5.7%) and Hobart (5.2%). Across most cities house rental yields are lower now than they were at the same time last year, the exceptions are Brisbane, Adelaide and Hobart where they are unchanged. At 3.4%, rental yields in Sydney are the lowest they’ve been since May 2005 and at 3.2 per cent Melbourne yields are at their lowest level since November 2010. The unit market shows different trends to the detached housing market with yields higher or unchanged over the year across most cities. Unit yields are lowest in Melbourne (4.2%) and Sydney (4.3%) and highest in Darwin (5.9%) and Brisbane (5.4%). Unit yields in Sydney are at their lowest level since August 2005 while yields in Melbourne have edged higher over the past month.

Across the combined capital cities, rental rates are recorded at $487 per week and they have risen by 0.1% over the month, 0.7% over the past three months and by 1.7% over the past 12 months. Although rental rates are still increasing, they are doing so at a moderate rate. In fact, the annual rate of growth has been recorded at 1.7% for four consecutive months and hasn’t previously been this low since June 2003. The slow pace of rental appreciation can likely be attributed to the booming level of dwelling construction coupled with high levels of buying activity from the investment segment which is adding additional rental stock to the market and curtailing rental increases. Looking across the capital cities, over the past year Sydney and Hobart have recorded the greatest increases in weekly rents. Rents have fallen over the past three months in Perth and Darwin; along with Canberra these cities have recorded rental falls over the year, down -4.2%, -4.7% and -2.6% respectively.

Looking at the performance of houses as opposed to units there isn’t a great deal of difference in the rates of rental appreciation. House rents were recorded at $492 per week across the combined capital cities in April 2015 compared to $461 per week for units. House rents have recorded stronger growth over the month (0.1%) compared to unit rents which fell by -0.1%. Over the quarter unit rental growth (0.6%) has been lower than houses (0.7%) however, over the past year units have recorded slightly stronger rental growth (1.9%) than houses (1.6%).
Comparing the current rate of rental growth with the 10 year average annual rate of rental appreciation highlights that rental growth is currently sluggish across all cities. In fact, the ten year average annual rate of rental growth is higher than the current growth rate in each capital city. The slower pace of rental growth may be attributed to a number of factors including: a ramp-up in investment purchases resulting in an increase in rental stock, an increase in housing supply which has also added to rental stock and a reduction in net overseas migration decreasing demand for rental stock.

Rental rates are already increasing at their slowest annual rate in more than a decade and the outlook is that a low rate of growth will continue. In fact, with residential construction activity continuing to increase, particularly for inner city units, we would expect that the additional housing supply may result in an even lower rate of rental growth over the coming months. This is likely to be most evident in the markets where new unit supply is surging, being Melbourne and Brisbane and to a lesser extent Sydney.

Sydney Rentals Unaffordable For Many – Anglicare

The Rental Affordability Snapshot (RAS) was originally developed by the Social Action Research Centre at Anglicare Tasmania to highlight the lived experience of looking for housing whilst on a low income. An audit of rental properties determines the extent to which on the nominated day a person on a low income is able to find housing that is both affordable and appropriate for their needs. The RAS has been coordinated by the national peak body, Anglicare Australia. This data relates to Sydney and the Illawara.

In April 2015, with the aim of highlighting the difficulty in finding an affordable and appropriate rental property for low income households. As part of this national project, Anglicare Sydney examined about 15,000 rental advertisements in Greater Sydney (including the Central Coast) and the Illawarra, over the weekend of the 11th April, using online and print media. The total number of listings has increased from more than 13,000 properties in the 2014 Snapshot and almost 14,000 properties in 2013. Results were sorted into 17 smaller Statistical Areas for analysis and reporting purposes. The findings revealed that for many households, finding appropriate and affordable housing is almost impossible.

Affordability of rental properties for people on income support: These households include single parents, people living with a disability, the elderly and frail aged, full-time students, and people struggling to find paid employment. For income support recipients, finding an affordable and appropriate rental dwelling which costs less than 30 percent of their household income is a difficult challenge, with few low-cost, private rental dwellings being available. If 2-bedroom properties were excluded for families with more than one child, there were only 52 unique properties in Greater Sydney and 19 in the Illawarra that were affordable and appropriate without placing them into rental stress (paying over 30 percent of income on rent). If the criteria were widened to include 2-bedroom properties for families with 2 children then 58 properties in Greater Sydney and 33 properties in the Illawarra were affordable and appropriate. Compared with previous results, the number of suitable rental properties (58) was similar in Greater Sydney (43 properties in 2014), although this remains less than one percent of total advertised properties. The number of affordable and appropriate properties in the Illawarra region (33) was also similar to 2014 (38 properties) and 2013 (42 properties). The vast majority of affordable and appropriate properties were located in the Outer Ring of Sydney (at least 20km from the CBD). It is concerning that there were no rental properties in Sydney that were suitable for single people on Youth Allowance, Disability Pension or Newstart without placing them into rental stress.

Affordability of rental properties for minimum wage households: Rental affordability was also examined for those people earning the minimum wage, including couple families, single parents and single people. If 2-bedroom properties were excluded for families with more than one child, there were 868 unique properties in Greater Sydney and 261 in the Illawarra that were affordable and appropriate without placing them into rental stress. If the criteria were widened to include 2-bedroom properties for families with 2 children then 2,302 properties in Greater Sydney and 521 properties in the Illawarra were affordable and appropriate. Compared with previous results, the number of suitable rental properties for people on the minimum wage has increased in Greater Sydney (up from 1,799 properties in 2014), while it has remained the same in the Illawarra Region (509 properties in 2014). While all Statistical Areas in Sydney contained at least one suitable property, the majority were still located further away from the CBD in areas such as the Central Coast, Blue Mountains or in South Western Sydney.

Payment of 30-45% of income as rent: Anglicare Sydney also explored the availability of rental properties in the 30-45%-of-income band that would place a household into rental stress. Using this criterion, there were 1,148 additional suitable listings in Greater Sydney and 310 in the Illawarra, where households relying on income support would have spent between 30 and 45 percent of their income. For households earning the minimum wage, there were 5,121 additional suitable listings in Greater Sydney and 298 in the Illawarra in the 30-45%-of-income band.

A range of policy solutions are needed to improve rental affordability for low income households, including the urgent need for increases in the supply of social housing, raising the rate of Commonwealth Rent Assistance and increasing the Newstart Allowance. There needs to be firm and long-term commitment to the supply of affordable housing from all levels of government, community and business sectors.

Q4 Capital City Rentals Static

CoreLogic RP Data just released their rental data to December 2014. Over the 2014 calendar year, advertised rental rates on a national basis increased by 2.6 per cent for both houses and units. At a capital city level, the rental performance across the different housing stocks was more varied. House rents rose by 1.2 per cent over the year, while unit rents outperformed the detached housing market, up 2.5 per cent over the 12 months to December 2014.

Quarterly movements. Capital city advertised rents remained unchanged over the final quarter of 2014, with house rents steady at $430 per week and unit rents recorded at $410 per week. Across Australia, house rents increased by 1.3 per cent to $400 per week, while unit rents were unchanged over the three months to December at $390 per week.

For houses, the performance across each individual capital city market was varied. Hobart houses saw rents rise by the most, up 5.4 per cent over the three month period, while Brisbane (2.5 per cent), Adelaide (1.4 per cent), Canberra (1.1 per cent) and Sydney (1.0 per cent) saw rents rise by a more moderate amount. Perth (-2.2 per cent) and Darwin (-0.8 per cent) were the weakest performing rental markets for houses over the three month period. Melbourne was the only capital city market to record no change, with weekly rents for houses stable at $385 per week. The performance across the unit market at a capital city level was somewhat weaker. Hobart (1.8 per cent) and Brisbane (1.3 per cent) were the only capital cities in which rents rose over the three months to December, while all other cities saw rents fall over the last quarter of 2014 with the exception of Adelaide and Canberra where no change was recorded.

Annual movements. Nationally, advertised rents are 2.6 per cent higher than they were in December 2013 for both houses and units, while across the combined capital cities house rents have risen by 1.2 per cent, compared to a stronger level of growth for unit rents which rose by 2.5 per cent. Over the year to December 2014, for houses, the strongest performing capital city market in terms of rental increases was Hobart, where the median advertised weekly rental rate was 3.8 per cent higher. Sydney, Adelaide (both 2.9 per cent), Brisbane (2.5 per cent) and Melbourne (1.3 per cent) all had rents higher in December 2014 when compared to December 2013. Perth (-6.3 per cent) and Canberra (-5.0 per cent) were by far the weakest performing capital city markets for growth in advertised house rents.

Similar to houses, Canberra (-7.3 per cent) and Perth (-4.4 per cent) were the weakest performers amongst the capital city unit rental markets and were the only two cities to see rents fall over 2014. Unit rents for both Adelaide and Darwin remained unchanged over the year, while Hobart (3.7 per cent) and Sydney (3.1 per cent) were the strongest performers.