Landlords put on notice about rent rises

Landlords have been warned they won’t be able to increase their rents any further because tenants are running out of money.

Landlords have been warned that renters have reached the peak of their spending power and will not be able to stomach further rent rises.

Economist Maree Kilroy of Oxford Economics said landlords who continued to increase their rents, on top of already high recent rises, faced an increased likelihood their tenants would have to vacate and find more affordable housing.

She pointed to new Oxford Economics research that showed national rents had reached a peak level of unaffordability and many tenants could not afford any further increases.

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“Rental affordability has deteriorated. The ability (of tenants) to take more rent increases has tapped out,” Ms Kilroy said.

Tenants were also beginning to adapt to the strained rental climate by forming more share houses while migration inflow – a key driver of rent rises – was expected to gradually wind down.

Byron Bay was deemed the least affordable rental market in the country.

Ms Kilroy noted that the market would remain tight for a considerable amount of time, but there were several forces that would work to ease pressure on rental prices in time.

One of them was potential interest rate cuts, Ms Kilroy said.

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“Interest rate rises have been an increased outgoing for investors, but if rates are cut there isn’t that same impetus for a rent increase,” she said.

Oxford Economics noted in a recent report that “stress on household budgets has reached a level that will significantly limit the capacity for further rental gains”.

“On balance, we expect this to pass through to more modest rent increases at lease renewal,” Ms Kilroy said.

A queue of renters outside a property in Sydney’s inner west. Picture: Adam Yip

It comes as a study by MCG Quantity Surveyors revealed there were multiple markets around the country where tenants were typically spending more than half their income on rent.

The least affordable rental market – measured by the average gap between rents and wages – was Byron Bay in the north of NSW.

Other markets where the average tenant spent more than half their income on rent included the Kingscliff-Fingal region of northern NSW, along with Hope Island and Mermaid Waters on the Gold Coast.

Sydney’s least affordable rental markets tended to be in the west – including the Bass Hill-Georges Hall area, Greenacre and Condell Park.

Mike Mortlock, Managing Director of MCG Quantity Surveyors, said the study revealed “the harsh reality many Australians face — a reality where the dream of living in a prime location is increasingly out of reach due to the widening gap between wages and rental prices.”

Originally published as Landlords put on notice about rent rises