Australia's tight rental market forces tenants to make tough choices

investing.com:

By Stella Qiu

SYDNEY (Reuters) — Australia's red-hot rental housing market, supercharged by record migration and a chronic supply shortage, could be reaching a breaking point for affordability as tenants grapple with rising costs of living.

Nationwide vacancies are at all-time lows and prices are up 30% over three years, forcing renters like Sydney office worker Lara Weeks into unenviable situations.

With no way to afford stratospheric inner-city prices when her landlord decided to sell the apartment she lived in for 18 years, Weeks and her cat recently downsized from a two-bedroom to a one-bedroom farther from the city centre that costs 22% more.

«I find it sad that I can't stay in the area for similar money,» she said.

Rent is now one of the country's biggest drivers of inflation, which at an annual rate of 5.4% in the September quarter is well above the central banks' targeted band of 2% to 3% and could lead to further interest rate hikes as early as next week.

That in turn would push up the variable rate mortgages held by most Australian landlords who are typically private investors with one or a few properties rather than large corporations, pressuring them to lift rents further and forcing tenants to make tough decisions.

«We're already seeing people that are in houses move to units and then the next logical step is if a unit gets too expensive, you go into a share house,» said Cameron Kusher, chief economist at PropTrack under REA Group.

NEARING THE PEAK

Many tenants, particularly in the most expensive city Sydney, have already been priced out of houses. PropTrack data showing house rents nationally were unchanged at A$550 per week, or about A$2,380 ($1,508) per month, in the September quarter.

Apartment rents