You're as well off renting

by Administrator 15. July 2014 22:51

Property prices would have to continue to rise at the same rate as they have for the past six decades for owners to be as well off as renters, according to a new research paper from the Reserve Bank of Australia (RBA).

The extensive study found the average homebuyer would be better off renting if house price growth slows below its long-term average.

"If potential homebuyers expected house prices to rise faster than 2.9 per cent (per year), then buying would be more attractive than renting,” said the RBA paper published yesterday.

In Is Housing Overvalued? two chief RBA economists argue that a comparison of the costs of home ownership with the costs of the nearest alternative – renting – "seems central to a measure of overvaluation".

On the assumption that "assessments of house prices are sensitive to assumptions about expected capital gains", the RBA finds that if prices grow more slowly, as some forecasters predict, the framework used in the paper suggests the average homebuyer would be financially better off renting.

The RBA said expectations of future capital gains implied by current house prices are in line with historical norms, which "allays some concerns about a housing 'bubble'".

The authors said house prices have increased at an average annual rate of 2.4 per cent since 1955.

"In April 2014, the cost of owning was the same as that of renting - 4.2 per cent of the value of the house. That is, houses are fairly valued," they said. 

Article Sourced from Residential Property Manager


Perth Rental Market

by Administrator 9. July 2014 08:44

About one out of every four households in Western Australia is a rental property, representing approximately 200,000 dwellings.

The proportion of renters has been reasonably steady at around 28 per cent of all households for over a decade, although there is a change occurring in the mix of private and public housing tenants with the proportion of private sector tenants growing.

Most rental properties are located in the inner suburbs. For example, over 75 per cent of all metropolitan rental properties are located within a 15 kilometre radius of the CBD.

Suburbs with the highest concentration include East Perth, Karawarra, West Perth, Northbridge, Highgate, Bentley, Glendalough and Victoria Park. Rental properties can account for up to 70 per cent of all dwellings in these areas.

Surprisingly, most tenants live in houses and not flats or units. Census result continue to show that up to 60 per cent of tenants live in traditional houses, although it’s true that around half of all strata dwellings exist as rental properties.

In WA the most common age group for renters is between 20 and 34. Typically, these are people in transition to home ownership. Not surprisingly then, the most common home ownership and buying age group is around 34 to 44.

Most tenants prefer a short lease, with the more common lease being six months. Tenants clearly like the flexibility of a short lease, however more than half of all such leases are renewed for a further six months when the initial lease expires.

The median rent for accommodation in Perth is now $450 per week if you include units, apartments, villas and houses in the equation. Houses alone are generally higher with a median of around $460 per week.

Darwin remains the most expensive capital with houses renting for around $650 per week, while Canberra and Sydney are similar to Perth at around $450. Adelaide is the cheapest at $330 per week.

The average rent for three bedroom homes across all eight capitals is around $405 per week. Seen in this context, Perth is about 15 per cent above the overall Australian rental average for a house.

However, rents in Perth have been slowly coming down since 2013 with the median weekly rent dropping $25 from $475 around this time last year.

This is due to a slow-down in population growth but also from large numbers of renters having taken advantage of very low interest rates to buy a home of their own, enabling them to leave the rental system.

This in turn freed up more properties for rent and is a key reason why Perth’s current vacancy rate is now a third higher than average, sitting at 4 per cent or 5,600 properties.