Australian tenants are feeling the effect of rising interest rates

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Renters across Australia have seen everything go up in cost, including their rent.

According to CoreLogic, rental prices have increased by 9.8% over the past 12 months, with the majority coming from capital cities.

The current problem facing tenants in Australia is the lack of available vacancies, says CoreLogic research director Tim Lawless.

“The number of rental listings available nationally has fallen by a third from the five-year average, with no signs of an increase in rental supply. In addition to an already tight rental supply, it is likely that demand will continue to increase as the number of overseas arrivals increases,” he says.

Currently, tenants are living in a “landlord market” due to the low number of vacant rental listings. The June 2022 Estate Rental Vacancy Report indicates that vacancy rates have declined nationally over the past year, with Melbourne and Sydney bearing the brunt of vacancies. This means that there is a strong demand for rental properties, but the supply cannot meet it.

Hence the increase in rental prices nationwide.

Another domain report indicates that the current median rental price is $515. Last year, the median rental price was $460, an increase of $55! This is the fastest price rise since 2014, according to recent data from the Australian Bureau of Statistics.

The increases could be partly blamed on the latest increases in RBA cash rates, where many investors may have passed on the extra cost of a home loan to their tenants. Another factor to consider is the rising cost of living, where almost everything is getting more expensive. There were few exceptions.

Associate Professor at the University of Sydney’s School of Economics Stella Haungfu attributes higher borrowing costs and tighter lending terms to the falling rental market.

“It is increasingly difficult for first time buyers to obtain a mortgage. As a result, they will return to the rental queue rather than buying a property. This effect will further increase demand pressure on the rental market,” she says.

How to deal with higher rent

If you are not financially ready to enter the real estate market, it is essential to know your rights as a tenant.

For starters, your landlord can’t suddenly change your rent during your lease.

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

If you’re in a situation where your landlord wants to raise your rent, consider negotiating the price. You can haggle with the promise of signing a longer-term lease in exchange for lower rent.

Remember that landlords want to make money and having an empty home will be a loss. It is in their interest to have a tenant at all times. Use this to your advantage.

How to become an owner

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

You can also start comparing home loans below to see what you can afford.

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