The price of housing in Australia is sucking in first buyers with ever smaller deposits with the result that mortgage repayments are absorbing a greater share of their pay. If that becomes uncomfortable, they know they can put the home back on the market and make a profit from its new value.
Unfortunately, this is reducing the number of homes available on the rental market and we are now seeing Estate agents culling the numbers allowed to inspect the stock available. Only those with an impeccable rental history and the ability to lodge a substantial bond make the cut.
Many low income earners find themselves shut out of this rental market or find themselves restricted to the city perimeter with a lengthy commute. The cost of fares to and from the city restricts their ability to have a roof over their heads.
During the coronavirus lockdown emergency legislation prevented evictions from rented property because of rent arrears. This reduced the rental stock available and new tenants are now finding a severe shortage of rental opportunities. The numbers sleeping rough on Sydney streets is ever increasing.
During the second world war the government imposed rental control. The families of those serving in the armed forces had tenure until the war ended and the rent was pegged to accord with a serviceman's salary. Often, the return to the buildings owner was less than the council charged for rates.
This arrangement persisted long after the end of the war and the owners of rental property were seriously disadvantaged. Should this rental drought persist, the government would be likely to again impose rent control and that could have serious consequences.
Interest paid by banks on term deposits is at a historical low. Buying property - and living off the rent is a good way to invest superannuation money, but the rent needs to equate to the value of the property bought. That is unlikely to coincide, given the present high value of housing.
The only way housing prices will fall to a level attractive to rental housing would be by an interest rate surge. Those with huge mortgage repayments would be forced to sell at a loss and make homes attractive again for investors.
Unfortunately, that is the way the market is headed unless sanity applies to the price of homes, or wages surge to a high which can accommodate mortgage values, and that would be a profound shock to owners of existing housing.
It takes a surfeit of buyers to maintain price levels out of kilter with reality !
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