Thursday, April 7, 2011

Real Estate Propagana Machine...

And the propaganda machine continues…
RENTERS continue to be squeezed as the deteriorating outlook for home affordability pushes up demand for rental properties.
House rents increased in every capital city except for Sydney, Melbourne and Darwin, a report by property data collection agency RP Data found.
Rents increased by 1.4 per cent nationally and 2.7 per cent in the capital cities over the past 12 months. Adelaide Now

An increase in rents by 1.4% nationwide or 2.7% in capital cities is now considered a squeeze? If rental increases below the current rate of inflation are considered a squeeze then sign me up for a squeeze like that every year! The reality is that the above figures show the cost of rent is falling (in real terms).

I think this pattern (rents falling in real terms) will continue Australia wide (along with house price falls) over the next several years. Households are already under pressure with rising costs of essentials such as groceries and petrol, there is little room for any large increases in the cost of rent as well. Poor retail figures are already showing that households have been cutting back on excess expenditure.

What cost increases have property investors and owners on a variable rate mortgage incurred over the last 12 months?

Using the standard variable mortgage rate from Loan Sense:

Mar-2010 – 6.24%
Mar-2011 – 7.79%

Investors and owners (with a mortgage) have seen a cost increase of 25% over the last 12 months (an increase of 1.55% in rate) on interest rates alone, besides rising council rates, maintenance expenses, levies & other associated ownership costs.

Who is getting the squeeze? It certainly isn’t renters!



  1. FYI This Blog just "popped" up :

    Blog about The Great Australian Housing Bubble. We use trustworthy and reliable data to uncover common misunderstandings about housing markets. We focus on the housing related topics: house price growth, housing supply and demand (shortage/oversupply), credit size and availability

    Essentially - it's oversupply!

    "By looking at the results we may see that Australia is facing huge oversupply of residential dwellings"

  2. Thanks Peter, already following that one. Seems to be a trend (new bearish real estate blogs hitting the blogosphere). Some quality information making it to the public eyes for those that look closely. Beats the glossy information that is often fed to us via other avenues.