By. Kate Mclntyre
19 Mar 2023

Young renter Danyal Diallo plans to flip the rental crisis on its head in a clever strategy that could save him up to $120 a week.

The 20 year old recently discovered just how cutthroat the Sydney rental market is after he moved to the Harbour City from Canberra to kickstart his career.

He scoured the market in six suburbs ranging from the west, north west, inner south and inner west facing queues of 10-15 renters at each shared house advertised.

“I visited 15 locations and some of those I went and saw the amount of people and thought, no chance,” he said. “The rent was so high too.”

But after securing a room in a shared townhouse in Burwood for just under $300 a week, bills not included, he was inspired to take matters into his own hands.

His current landlord was ‘homevesting’ – renting out a couple of rooms in their own home to help pay down their mortgage.

After crunching the numbers he realised if he did the same he would be able to cover most of the mortgage repayments by renting out two rooms in a three bedroom townhouse.

This would give him stability while helping to create wealth over the long term.

“I want to own my own space,” he said. “Right now I feel like I’m throwing money away for somebody else’s mortgage.”

“It’s not your place – you feel like you’re a temporary guest there and that’s not a good position to be in.”

Director of sales at Upside Realty James Kirkland said more first homebuyers were becoming creative in order to escape the insecurity and rising cost of renting.

“We have examples of people who have been able to buy the place they were renting,” he said. “They want that security – the concern around increased rental prices has been such a major issue.”

He said those considering homevesting should look to suburbs that are either central to major metro hubs, such as the city or Parramatta, or close to universities and tafes.

Property investor and director at Aus Property Professionals Lloyd Edge said he has known a few people to buy and sublet their homes in a similar strategy.

He said it’s important for homevesters to speak with their accountant about any tax implications that could arise.

He also advised subletters to have a contract drawn up along the same lines as a standard tenancy agreement and request a bond in order to protect against loss of rent.

“I’d also recommend they have suitable landlord’s insurance in place, which can cover damage to the property and loss of rent,” he said.

By Shannon Molloy
13.03.2023

Rental vacancy rates across Australia have plunged by half since the start of the Covid pandemic, showing just how severe the housing crisis is.

The latest PropTrack data reveals how surging demand from tenants is far outstripping the supply of dwellings in most capital city areas.

Perth has the most constrained rental market in the country, with a vacancy rate of just 0.85%, followed closely by Adelaide on 0.92%.

Conditions are very tight in the three major cities – Sydney’s rental vacancy rate is 1.7%, Melbourne’s is 1.4%, and Brisbane’s is 1.3%.

A balanced rental market is considered to be one with a rental vacancy rate of 3% or more.

Every city bar Hobart and Canberra saw further declines in their rental vacancy rates in February.

But it’s analysis of the change in the climate since the start of the pandemic that reveals just how swiftly things have deteriorated.

“Nationally, the rental vacancy rate has fallen by 52% since the pandemic and is now at its lowest level since late 2018, showing just how scarce rental properties are,” PropTrack senior economist Paul Ryan said.

Things are particularly dire in Perth, where the rental vacancy rate has slumped by a staggering 69% since pre-Covid.

“Vacancy rates have continued to fall markedly over the past year, down 0.6 percentage points. This is a continuation of the trend seen since early 2021.”

Capital cities are seeing a rapid tightening, with the combined rental vacancy rate sliding another 0.14% in February.

“It’s now tougher to find a home to rent in the capital cities than in regional areas, which is a reversal of trends seen since before Covid,” Mr Ryan said.

Analysis released last week found some Sydneysiders are paying more than $350 extra per week in rent than they were just 12 months ago.

In Melbourne, some tenants are forking out as much as $165 per week more, while in Brisbane, some are forced to find an extra $185 per week.

Advocacy group Everybody’s Home said the soaring cost of rent has now become an “emergency” and called on the Commonwealth to intervene.

“When energy prices skyrocketed during the pandemic, the Federal Government stepped in to protect people,” the group’s spokesperson Maiy Azize said.

“But this housing crisis doesn’t seem to be hitting home fast enough for those who hold the purse strings.

“Homes are just as important [as power bills]. We need [politicians] to understand that this is an emergency, and that homes are at stake.”

Mr Ryan warned that things are likely to get worse long before they get better.

“With demand for rentals expected to remain strong, we see no reprieve in the coming months. These market conditions mean prices will continue to grow strongly throughout the year.”

Indeed, late last month, St George economists forecast an 11.5% surge in rent prices over the course of 2023, which comes on top of a 10% jump last year.

In an article for The Conversation earlier this year, Associate Professor Bruce Bradbury from the Social Policy Research Centre at UNSW Sydney called for the rent assistance payment to be doubled.

The welfare measure, available to those on the pension, receiving the Family Tax Benefit and Parenting Payment, or on JobSeeker, “is only modest”.

And the thresholds that determine the amount provided are woefully out of date – considerably smaller than actual market rents.

“There’s ample scope to lift it to something nearer the rents actually paid,” Associate Professor Bradbury said. “For many Australians, the rent crisis is just starting.”

By Emily Hutchinson
08,02 2023

Mortgage brokers are seeing an increase in the number of tenants moving to buy a home on the back of rapidly rising rental prices.

One of them is Sarah Lyons*, who had been happily renting her Melbourne apartment for three years until last November, when the rent was hiked beyond what she could justify.

“My rent increased by 30%, which I thought was ridiculous,” Ms Lyons. “I just couldn’t see the benefits of paying $500 per week for a one-bedroom place anymore.

“I decided to get in touch with a mortgage broker and discuss my options. I had some savings, but wasn’t sure if it was enough to buy a place of my own – turns out it was.”

Ms Lyons purchased a one-bedroom apartment in a neighbouring suburb and is paying just slightly more in mortgage repayments than what she would’ve in rent at the higher price.

“At least this way, I end up with my own home,” she said.

Expensive rents are making tenants like Ms Lyons consider alternative arrangements, with many finding the option of buying to be more stable and a similar cost as renting.

Paul Williams from Mortgage Choice South Melbourne has been consulting a number of clients who have decided to buy after their rents were increased.

“It’s been the prompt for many people – the increase in rental prices and the lack of available properties,” Mr Williams said.

He noticed a particularly sharp uptick in December 2022.

“People have really tightened their spending in my view and now they’re getting sick of renting because they’re just waiting for their rents to go up,” he said.

PropTrack data shows that across Australia, 20.9% of homes are currently cheaper to buy than to rent, with the biggest portion in the Northern Territory with 94.4% of dwellings.

Paul Ryan, senior economist at PropTrack, said the apartment market is particularly cheaper to buy in than rent at the moment.

“In particular, unit prices are typically close to pre-pandemic levels, but are now seeing rapid rent increases,” Mr Ryan said.

“So, I think many of these could be close to being cheaper to buy than rent – if not now, then soon as rents are expected to keep rising strongly over 2023.”

Housemates pull together a deposit

Mr Williams said he has also seen an uptick in friends or housemates buying together in a bid to navigate the increasingly difficult rental market.

“I’ve had three clients in just one week who are friends buying together. To do three a week is unprecedented for us.

“Previously, you might do one every few months. I’m not sure whether it’s a trend, but I’d be surprised if we don’t see continued increase in enquiry.

“What I’ve been seeing is that for some renters in share houses… their rents have increased between 10% to 30%. So, they sit down and start to have a conversation about pulling together savings and looking where the mortgage repayments are relative to the rent they would pay.”

While there are many benefits to buying with friends or housemates, including being able to get into the market sooner or purchase in a location you’d otherwise be priced out of, Mr Williams said there are also risks.

“We encourage any friendship groups to sit down and really work through a number of scenarios, and to get legal advice.”

What’s making tenants leave the rent market?

A combination of increased rents and a shortage of supply is making the rental market less appealing to tenants.

The latest PropTrack Rental Report shows that prices are on the rise nationally, with median advertised rents sitting at $480 per week – a 6.7% increase over 2022.

Unsurprisingly, Sydney and Melbourne saw the sharpest increases.

Vacancy rates are also low, sitting at just 1.3% nationally as of December. They are especially low in Sydney (1.8%), Melbourne (1.7%), and Brisbane (1.1%).

Added pressure is expected to come from the return of international students and a surge in skilled migrants.

* Surname changed at the interviewee’s request for privacy reasons

By. Erinna Giblin
2.Mar.2023

While recent news headlines might suggest scary property market conditions, agents have a different perspective – seeing huge buyer demand and strong results for sellers.

It’s true that rising interest rates and softening property values mean those looking to make their next move don’t have the same once-in-a-lifetime opportunities seen during the pandemic.

But what’s the average seller to make of the current climate when deciding whether or not to list this year? Things aren’t quite as gloomy as some in the media make out.

We’ve spoken to some of the top agents around the country to get their take on what’s actually happening on the ground.

Nine things sellers might not know about the 2023 property market

1. This year marks a return to a more sustainable market

Rather than wishing to return to the lofty years of the pandemic and its unsustainable price growth, experts are appreciating a return to reality and more stable market conditions.

Andrew McCann, managing director of Jellis Craig Armadale in Melbourne, said what’s happening at the moment is normal.

“It’s clearly come off the extreme heat of what was a very chaotic market post-Covid,” Mr McCann said. “We’re back to a normal rhythm. It’s a much more productive market than what’s being written about.”

The first three auction weekends of the year saw a decent volume of 60 to 90 properties, with a 75% to 82% clearance rate, which is very healthy, he said.

“Prices are really stable, and buyer activity is strong, which is a good sign. I’d say it’s a glass-half-full market.

“Our buyer enquiry is 40% up from a year ago and there’s a shortage of property. Now is a good time to sell because, with little choice, buyers are looking at everything that’s available.”

By.Emily Hutchinson, Rent Specialist and Property Journalist
1 Mar 2023 

 

New data shows national home prices are on the rise as the downturn loses momentum amid low supply and consistent buyer demand.

February’s PropTrack Home Price Index shows home prices were up 0.18% across the country with price growth in every capital city except Hobart.

While home values have decreased from their peak in most markets, nationally prices are 29.4% higher than pre-pandemic levels.

Senior PropTrack economist, Eleanor Creagh, said the recent uptick in prices is a result of lack of supply.

“While activity in the housing market has fallen as interest rates have quickly risen, the limited stock available for sale has led to a pickup in competition among potential buyers insulating home values.”

Despite the latest data showing signs of recovery, Ms Creagh said it’s too early to call the end of the downturn.

“While interest rates have been the primary driver of home price falls to date, there are factors beyond interest rates at play. Sellers in market are now benefitting from low competition with other vendors, as buyers vie for available stock.

“The constrained level of properties available for sale is putting a floor under home prices and has concentrated buyer demand,” she said.

Ms Creagh added that there is an expected 25bp rate rise to come in March, which would take the cash rate to 3.60%, further lowering the borrowing capacities of many buyers.

“However, if supply remains limited, this will help counter the downward pressure on home prices,” she said.

Sydney home prices increased for the second month in a row, with February’s 0.36% rise following a 0.26% increase in January. Sydney’s prices have declined 6.64% in the past year, but remain 22.2% higher than pre-pandemic levels.

In Brisbane, prices were up 0.12% in February, following a very slight uptick of 0.02% a month earlier. Prices in the city are now 3.49% below their peak recorded in April 2022.

Meanwhile, the price correction in Melbourne stalled in February, with prices growing 0.18%. While prices in the city are now 6.09% below their peak, they remain 13.9% higher than in March 2020.

However, it was Adelaide that saw the biggest home price growth of 0.44% in February.

Director of Ray White Adelaide City, Andrew Downing said that since Covid, he has seen many interstate settlers and international expats move to Adelaide, along with strong investor interest.

“More recently, interstate investors have been really strong in the CBD, especially in the lower price brackets of $400,000-$600,000 who want to start a portfolio over here,” he said.

Perth’s home prices increased by 0.13% in February to a median of $565,000.

“This relatively affordable capital has held up better than most capitals over the past year, with prices increasing 2.49% to now sit just 0.24% below peak levels recorded last year. Potential buyer demand per listing is also at a record high,” said Ms Creagh.

The ACT saw no change in price in February, and remained 5.88% below its peak in March 2022. Similarly, Darwin saw little change in price with a 0.04% increase.

Hobart was the only capital city to drop in home value by 0.29%, which is 4.09% below the peak reached in April 2022, however the pace of these price declines have slowed since June and July last year when interest rates first started rising.