Rents to soar in 2010

Rising interest rates and an acute undersupply of housing could force rents to jump by 7 per cent in some parts of the country.

According to figures released by BIS Shrapnel, the national average yearly rental growth is forecast to be 5.8 per cent, resulting in rental households passing an extra $1.9 billion to landlords each year.

The average rental rate for Sydney is expected to grow by 7.1 per cent on average annually between next year and 2012.

In an update to its Residential Property Prospects 2009 – 2012 report, BIS Shrapnel said a reduction in the construction of new medium and high-density housing was responsible for the rising rental rates.

Starts of only about 30,700 medium and high-density housing units are expected in 2009, representing an annual decline of 30 per cent.

And the decline in supply has been exacerbated in recent months by tighter lending restrictions imposed by the majors.

Jason Anderson, an economist at BIS Shrapnel, said he was uncertain as to how long it would be before lending restrictions eased.

“Even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said.

The rush to buy a first home was another factor adding to the pressure on rental markets.

"A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said.

Rental rates in Melbourne are expected to climb by more than 5 per cent next year, while Perth is one of the few cities expected to enjoy a decline in rental growth, dropping from 6.6 per cent this year to 3.2 per cent in 2010.

Rising interest rates and an acute undersupply of housing could force rents to jump by 7 per cent in some parts of the country.

According to figures released by BIS Shrapnel, the national average yearly rental growth is forecast to be 5.8 per cent, resulting in rental households passing an extra $1.9 billion to landlords each year.

The average rental rate for Sydney is expected to grow by 7.1 per cent on average annually between next year and 2012.

In an update to its Residential Property Prospects 2009 – 2012 report, BIS Shrapnel said a reduction in the construction of new medium and high-density housing was responsible for the rising rental rates.

Starts of only about 30,700 medium and high-density housing units are expected in 2009, representing an annual decline of 30 per cent.

And the decline in supply has been exacerbated in recent months by tighter lending restrictions imposed by the majors.

Jason Anderson, an economist at BIS Shrapnel, said he was uncertain as to how long it would be before lending restrictions eased.

“Even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said.

The rush to buy a first home was another factor adding to the pressure on rental markets.

"A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said.

Rental rates in Melbourne are expected to climb by more than 5 per cent next year, while Perth is one of the few cities expected to enjoy a decline in rental growth, dropping from 6.6 per cent this year to 3.2 per cent in 2010.

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