City rents set to rise says report

BY MICK ROBERTS

The number of people in the city turning to welfare assistance is growing as rents and mortgage rates spiral out of control.
Rents are set to rise over the next two financial years across Sydney due to the undersupply of new housing, according to a recently released industry report.
Business analyst, BIS Shrapnel, expects Australian residential property markets to experience marginal price increases in 2008/09 as interest rate rises halt price growth rather than force a downturn.
Despite the report forecasting another interest rate rise in September, the average cost of renting in the city is set to rise much more than the cost of buying in 2008/09 and 2009/10, due to the undersupply of new housing.
Adding to the problem, national population growth of 1.5 per cent is expected in 2008/09, the highest since the late 1980s.
Australia is experiencing record overseas migration which is underpinning what is already strong underlying demand for housing, according to BIS Shrapnel’s Residential Property Prospects, 2008 to 2011 report.
With construction of new dwellings down on peak levels, a rising deficiency of dwellings is also evident in the extremely low vacancy rates and will drive strong rental growth in Sydney.
Darcy Byrne, a founding member of Labor for Affordable Housing – an internal ALP organisation promoting affordable housing policy – says he is deeply concerned that the cost of housing is forcing working class people out of their communities.
‘In my community of Balmain the very people who built the place into a wonderful, vibrant community are being forced out due to the cost of housing,’ he said.
Not surprisingly, he places the housing crisis blame firmly on the previous conservative coalition Government.
‘There is now unquestionably a national crisis in housing affordability in Australia,’ Mr Byrne told The City News.
‘The effects of this crisis are being felt most keenly in Sydney, particularly by low income tenants in the private market.’
Mr Byrne said there is growing international consensus that large scale government investment in the bottom end of the market is the most effective strategic approach to making housing more affordable.
He said the Federal Government’s National Rental Affordability Scheme will provide a tax incentive for institutional investors such as superannuation funds to partner with community housing providers, State and Local Governments in constructing new housing that will be rented to low and middle income earners at 20 per cent below market rates.
Through the scheme the Government aims to facilitate the construction of 50,000 new homes in 5 years and 100,000 new homes in the next decade.
‘This scheme has already been the catalyst for the recently announced partnership between the City of Sydney and the NSW Government to build a mix of social, key worker and private housing in Ultimo,’ Mr Byrne said.
Meanwhile as rising mortgages and rents impact on struggling families, welfare groups such as the Salvation Army face the crisis head on.
‘People in the lower income bracket are doing it harder than ever before,’ Salvation Army Financial Counsellor Tony Devlin said.
‘The impact on the rental market is due to petrol price increases and the costs of living going up,’ he said.
Mr Devlin said banks repossessing homes because owners can no longer afford to pay their mortgages was also impacting on renters.
‘It’s quite hard to know how bad it really is with renters being evicted from their properties because their landlords cannot pay their mortgages,’ he said.
‘Tenants are getting kicked out with very short notice.’
BIS Shrapnel senior project manager and report author, Angie Zigomanis, believes rising rents and improving credit conditions will be the key to the next upturn in prices in Sydney.
‘As credit conditions recover over the course of 2009, we expect banks will gradually pass on lower borrowing rates to customers. This easing will enable house price growth to pick-up in many centres during 2009/10 and 2010/11,’ Mr Zigomanis said.
BIS Shrapnel anticipates the Sydney median house price will reach $550,000 in June and forecasts the Sydney median house price will reach $560,000 in June 2009, representing a 17 per cent decline in real terms from the March 2004 peak.
BIS Shrapnel forecasts total growth over the three years to June 2011 to reach 18 per cent, with the strongest growth coming through at the end of the period.