THE red-hot rental market has already started to cool and there’s further sign of relief over the horizon for struggling tenants.<\/p>\n
Renters in many suburbs have endured double-digit growth in rents as demand for housing outstrips supply.<\/p>\n
But vacancy rates have already started to ease and the rate of growth has begun to slow, with CoreLogic analysis suggesting the rental boom will keep tempering from here.<\/p>\n
Head of research at the property data firm, Eliza Owen, said rental movements and interest rates do tend to move together.<\/p>\n
Ms Owen said there were a couple of reasons the two moved in concert.<\/p>\n
One was that rents are included in the consumer price index, the key measure of inflation. When rents rise, so does inflation, prompting higher interest rates.<\/p>\n
Another is that interest rates can directly impact rents, including by making investment properties less attractive. This reduced rental supply, pushing rents up.<\/p>\n
She said higher borrowing costs “may have” prompted investors to pass on costs to renters, but it was not a clear-cut relationship.<\/p>\n
The availability of rentals generally determines how much rents can rise, as tenants can choose to leave if there are cheaper options on the market.<\/p>\n
Investors of all types, including those with no loan or a small one, have likely taken advantage of the tight rental market to increase their returns, she said.<\/p>\n
In fact, the rental market started going up in mid-2020, well before interest rates started rising last year, due to a range of other factors.<\/p>\n
Investors who have lifted rents in response to higher interest rates are unlikely covering the full extent of more expensive mortgages, Ms Owen added.<\/p>\n
“To put recent rate hikes in perspective, CoreLogic monthly median rent values are estimated to have increased $225 per month over the year to June,” Ms Owen said.<\/p>\n
“However, mortgage costs of a new investment loan are estimated to have increased by $948 per month on the median Australian dwelling value.”<\/p>\n
The property researcher offered a couple of other reasons for renters to be more optimistic about 2024, including the reforming of share houses in response to poor affordability.<\/p>\n
She also said the backlog of home building work was starting to clear, freeing up rentals occupied by those waiting for their homes to be built.<\/p>\n
Lending data has also pointed to investors returning to the market, which is likely to continue if interest rates fall next year and the property market keeps recovering.<\/p>\n
New government initiatives around social and community housing may also contribute to a pick-up in housing supply, Ms Owen said.<\/p>\n
Prime Minister Anthony Albanese said the government had a range of policies in the works to boost housing supply, including a $2 billion social housing accelerator to deliver thousands of new social homes.<\/p>\n
The Government is also trying to push its $10 billion housing future fund through parliament, but it has faced opposition from the coalition and the Greens.<\/p>\n
The May budget included a new incentive for private sector build-to-rent, which Mr Albanese said could result in as many as 250,000 new dwellings being built.<\/p>\n