“Scrolling through social media I am seeing more posts about the current rental squeeze. Stories not just about rental increases but also about the scarcity of rental properties in general, even at higher prices, and even some stories about fears of being homeless. This led me to think about the forces that have created such an unpalatable environment.
It would be hard to argue that for many years the real estate market in the Whitsundays has not been flat, with little or no capital growth, and in many cases negative growth.
Being such a transitory place, people have needed to relocate due to work or family and they have looked at selling their home. In some cases when called in to provide an appraisal at below what the owners paid for it, sometimes the decision is to sell, take the loss and move on, but in many cases the decision was to hold, rent it out and wait for a lift in prices to achieve a better outcome.
This continued for many years, providing a steady stream of new rental properties to meet rental demand, and at sometimes an oversupply of property that caused rental prices to fall. It was not too long ago that tenants in one of my investment properties “requested” a rent reduction or they would move out – with 50 or more vacant units in the area offering lower rent we had no choice but to comply.
Now whilst we do not condone disproportionate rent increase, sometimes with the increased costs of body corporate, rates and so on, it is necessary to increase the yield to lessen the gap of costs of ownership.
But now, with the cost of lending at historically low rates, and an improvement in prices those houses that were in the rental pool by default are now being sold down, quite often to owner occupiers which is reducing the available houses to rent. This is changing the supply and demand to favour the property owner and rents are increasing.
Normally when there is a rise in rental rates, tenants that were in houses sometimes decide to downsize to a unit rather than pay the higher rent, but units are also in short supply.
Due to the increase in insurance rates for units and townhouses in a body corporate, prices of these units have fallen, well below the original costs of purchase and in some cases below the cost of construction. Even though there is a huge demand for affordable housing options there hasn’t been any significant unit sites developed for over 10 years.
So what’s the answer?
First spare a moment for our rental team, they see on a daily basis the human side of this situation. Not long ago during Covid they were dealing with the fact that many tenants had no way of paying rent and had to negotiate rent reductions and rent free periods with owners to ensure tenants had a place to live. Now they are working hard to find houses for many displaced families with no place to go.
At the moment I can’t see any quick fix, rents will continue to rise and rental options will continue to tighten – many people are looking at all options to purchase a property, using parents as guarantors, selling boats and jetskis to fund a deposit.
With the cost of lending money at all time lows there has never been a better time to enter the market – you can still buy units in Cannonvale for $150,000 which if you can find a 10% deposit the repayments would be as low as $160 per week.
Remember it may not be your dream home but it will be your home.”