Renters set to be stung with rising price rises

The rise in home loan interest rates is now trickling down into rental prices across Australia.

Just like mortgage holders fearing rate increases, renters are starting to be hit with steep price increases, and mortgage brokers expect it to continue.

Mortgage Choice Tea Tree Gully/Golden Grove broker, Chris Longwill says renters will be be hit with further increases over the next couple of years.

“The next 12-24 months will be a landlord’s dream and a tenant’s hardship as rent prices start to increase more commonly and broadly due to the rising interest rates hikes.”

Ray White Data Analyst William Clark agrees. “It’s unlikely rental prices will go down; historically rental prices have taken a ‘stepped’ pattern where rents surge and then stay level.”

He notes a correlation between rental prices and housing prices.

“Rents follow a sort of ‘band’ of rental yields normally between 1-10% of property price. Where they sit within this band varies by geography, and will rise and fall with interest rates.

“Interest rates will drive the cost of funding an investment property, so rents will be driven by rises and falls in the cash rate. We see this now with large rental increases with the steep increase in cash rate in recent months.”

The real estate analyst notes that, for a change, it’s not Sydney and Melbourne that are seeing the biggest growth. it’s the other capital cities where rent has increased by as much as 18 per cent.

According to data from Ray White, houses in Darwin had the sharpest increase going up an average of $100 per week from, $500 to $600. The lowest house increase was in Melbourne at just $20, going from $430 to $450.

House rental increases by city in Australia