Rent hikes forecast

Renters are being told to expect steep increases this year due to low supply, rising interest rates and land tax costs, which will impact on landlords.

Australian Property Monitors reports that rents rose by only 2 per cent nationally last year, but predicts that they will grow more rapidly this year.

According to Australian Property Monitors' Quarterly Rental Report landlords showed restraint in their approach to rent increases last year, with rental price growth remaining flat for the December quarter in 2009.

Overall 2009 was the weakest year for national rental growth since 2002 with the 2 per cent increase nationally well down on the average rate of 12 per cent for 2007 and 2008.

Rises in median rents in Perth, Adelaide and Canberra were not enough to offset flat rental markets in the major capitals of Sydney, Melbourne and Brisbane.

"It is clear that in 2009 rents were generally kept in a holding pattern as landlords and the market waited to see the end of the global financial crisis," said Matthew Bell, Economist for Australia Property Monitors.

Ballarat real estate agent Alex Campbell told ABC news that local rents could increase by up to 10 per cent this year. He said properties rented at about $250 per week last year, have already risen to $270.

He went on to say that continuing low vacancy rates will fuel further rent rises.

"Basically when you look at the vacancy rate, the rate being in our office at less than 1 per cent and throughout Ballarat at about 1.2 (per cent), the demand is there, and the demand is always pushing the prices up, so I'd expect this year for there to be a 5 to 10 per cent increase in the Ballarat area," he said.

2010 snapshot

Renters should prepare for the likelihood of rising rents in 2010

Sydney rents are likely to increase by at least double last year's rate to approach the $500 per week level for houses.

After a totally flat 2009, Melbourne rents should resume their long-term upward trend and are expected to rise by five to seven per cent, in line with their long-term growth rate.

Both Brisbane and Perth are poised to outperform the rest of the country as their property markets play catch up to Sydney and Melbourne. In Perth, median house rents could hit $400, a rise of 11 per cent, in line with the average growth rate of 12.4 per cent experienced since 2003. Brisbane rents, coming off the same base of $360 as Perth, are also likely to approach $400 with a growth rate closer to eight per cent expected.

"Although rents should rise across the board, an improving employment outlook will mean more income for renters to be able to cope with these increases in 2010," said Mr Bell.

"However, this is just another cost on already tightening budget for those Australians that did lose their jobs or were forced to move to part-time work during 2009. The rental increases set for the year ahead will mean many families will have to chase more affordable rentals even further from areas of potential employment."

The bottom line to this is that the property market should reap the benefit. But as house prices continue to climb and with little relief expected and the First Home Owner boost removed, ownership is out of reach for more people, Mr Bell told The Age.

"An improving employment outlook means that overall, renters will be more willing and able to afford rental increases," Mr Bell said.

The unemployment rate sank to 5.7 per cent in November and the consensus among economists is that the worst is over in the job market.

Vacancy rates remain very low across the country and population growth is at historically high levels.

"On the supply side, there simply aren't enough new properties being built for investment purposes to meet this increased demand," says Mr Bell.

"Increased costs for landlords in the form of rising interest rates and rising land taxes due to increasing land values, should mean that asking rents will start to increase steadily throughout 2010."