Monday, 7 July 2008

Rental crisis and what you can do to avoid it.

The ever increasing affordability of housing in Melbourne is causing some grief in the rental market. The landlords may be loving it as there are no shortage of potential tenants. This situation has inflated the rents of properties. I don't believe that the situation is isolated to only Melbourne, the other capital cities are also experiencing similar effects, especially in Perth and Brisbane.

Unfortunately, the rent for a property is almost dictated by how many people wants to live it. In today's rental market, I would not be surprise if the rent is higher than a mortgage's repayment.

In the Frankston area, just a short drive from where I live, the landlords are being opportunistic in trying to extract as much rent as possible. This article from the local paper discusses the sad state of affairs.

So, if you are renting, what you do to help with the rising rent rates.

  1. Move the an area with cheaper rent. Some suburbs has lower rent rates than others for many reasons. If you are happy with the reasons on the lower rent rate, consider moving to these locations.
  2. Negotiate with your landlord. Most land lords are reasonable people, and an attempt with communication with them shows that you are willing to discusses the crisis with them. In most cases, most land loads are happy with a good tenant with a reasonable rent rate than a bad tenant at a high rent rate.
  3. Know your tenant rights. If your land lord is not is reasonable, have a good knowledge of what your rights are. For rentals in the state of Victoria, you can contact the Consumer Affairs for more information. The are similar government bodies in the other states an territories.
  4. Consider purchasing a house. If the rent that you are paying is so high that it almost as high, if not higher, than a mortgage repayment, then consider purchasing a house. In today's market where new house purchases are declining, the developers are extremely accommodating in the terms and conditions. Have a chat with them. Be aware that purchasing a house is not something to be entered into lightly, it is littered with traps and pitfalls.
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If you enjoy this post, you may also enjoy the following post:
Public Housing and the homeless
Would you miss a meal to pay your rent?



8 comments:

Debt Dieter said...

It's the same here in Sydney, I've got friends who want to live in the city who have been looking for a place for months!

Even looking for my place back in december last year there would be 15 people to look at a place, even on a Thursday lunchtime!

tehnyit said...

Similar scenes are happening here in Melbourne as well, I have read of applications trying to sign up for the property unseen.

With such a high housing cost, Sydney would be an absolute crazy place to get a rental place.

Aaron Stroud said...

Downsizing is another good idea. Staying open to the possibility of a renting a smaller apartment will increase your options. And if you do find a smaller apartment, you'll end up saving money.

Anonymous said...

Unless a landlord owns more than 50% of a rental property, it's unlikely to be positively geared. For example, our rental mortgage is $290K (property worth $350K) and the interest payments on that are about $2,200 per month. The rental is $265/wk = $1,148. so we are subsidising the tenants $1100/month, plus paying council & water, repairs etc etc.

Rental property yields normally average 3.5-5.5% p.a., (based on rent per value of property - so this excludes all other investment costs, including interest). So unless you have a rental property in a high capital growth area, your investments aren't even doing as well as cash at the moment.

And let's not delve into the tax side of things here...!

Nice to see you blogging again though.

Sharon

Anonymous said...

p.s.
Oops - posted comment a bit early - also meant to say that I can't believe people are that unethical! crazy.

Sharon

tehnyit said...

Sharon, Thanks for stopping by and the encouraging words.

Debt Dieter said...

I find Sharon's comments interesting in that she sees it as 'subsiding her tenants'?

Surely it's the tenants that are subsidising her mortgage payments on the rental property, not the other way round?

tehnyit said...

@diet debter, I think Sharon is taking the renter's perspective. The landlord is subsidising the tenants so that they tenants are able to live is the house at a much cheaper cost. If they tenants were to purchase the same property to live there, they would have to come up with the extra $1100 per month plus the rest of the outgoings.

I would have viewed it from a landlord's perspective where the renter is subsidising the mortgage payment.