Australian renters are feeling the effects of rising interest rates

Renters across Australia have seen everything get more expensive, including their rent.

According to CoreLogic, rental prices are up 9.8% over the last 12 months, with the majority coming from capital cities.

The current problem renters are facing in Australia is a lack of vacancies, says Tim Lawless, Research Director of CoreLogic.

“The number of rental offers available nationwide has fallen by a third compared to the five-year average, with no sign of an increase in rental supply. Adding to the already tight rental supply, demand is likely to continue to rise as the number of overseas arrivals increases,” he says.

Tenants are currently living in a “landlord’s market” due to the low supply of vacant rental properties. The June 2022 Domain Rental Vacancy Rate Report says vacancy rates have been falling across the country over the last year, with Melbourne and Sydney feeling the brunt of rental vacancy. This means that the demand for rental properties is high, but the supply cannot meet it.

Hence the nationwide rent increases.

Another domain report states that the current rental agent price is $515. Last year the average rental price was $460 – a $55 increase! This is the fastest price jump since 2014, according to the latest data from the Australian Bureau of Statistics.

The increases could be attributed in part to recent hikes in RBA cash rates, where many investors may have passed on the additional cost of a home loan to their tenants. Another factor to consider is the rising cost of living where almost everything is becoming more expensive. There were few exceptions.

Stella Haungfu, Associate Professor at the University of Sydney’s School of Economics, attributes higher borrowing costs and tightening credit conditions to the declining rental market.

“It is becoming increasingly difficult for potential first-time buyers to obtain a home loan. As a result, they jump back in the rental queue instead of buying a property. This effect will further increase demand pressure on the rental market,” she says.

How do you deal with higher rents?

If you’re not financially ready to enter the real estate market, it’s important to know your tenant rights.

First of all, your landlord cannot suddenly change your rent during your lease.

States require landlords to give several days’ notice of potential rent increases. If you find a raise excessive, you can even try to contest it.

If you are in a situation where your landlord wants to increase your rent, you should negotiate the price. You can haggle by promising to take a longer term lease for a lower rent.

Remember that landlords want to make money and an empty seat is a loss. It is in their best interests to have a tenant at all times. Use this to your advantage.

How to become a homeowner

With rental prices expected to continue to rise, it might be time to find a forever home. To start buying your home, read Mozo’s home equity loan guides and tips.

Alternatively, you can start comparing home loans below to see what you can afford.

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