The big squeeze is on in the rental market and Australian renters have been feeling the pain of skyrocketing rents over the first half of 2021.
According to a survey of 1500 households by ME Bank, rent stress has soared in the six months to June with renters, on average, spending 41 per cent of their income on keeping a roof over their heads.
This represents a significant extra hit to their hip pocket of 8 per cent.
More than two-thirds (68 per cent) of renters reported rent stress, which is typically considered to be rental payments of more than 30 per cent of household disposable income.
ME’s consulting economist Jeff Oughton said a combination of factors was contributing to the rise in the nation’s rent stress.
“Rental markets have tightened markedly across the majority of Australia and rents have risen significantly due to falling vacancies,” he said.
“Renters are now facing some of the biggest rent hikes we’ve since the global financial crisis.”
The survey results indicate the current level of rent stress is 3 per cent higher than in December 2019, before the onset of the Covid-19 pandemic.
It also shows the pain is being felt most by single parents, couples with young children, retirees, and households on low incomes (less than $40,000 per annum) and below average incomes ($40,000-75,000 per annum) reported higher levels of rent stress.
Additionally, more women (75 per cent) reported rent stress than men (60 per cent).
The latest figures from Corelogic show that in the six months to June, the median rent of houses and units jumped to $476 per week, a 6.6 per cent increase compared to the same time last year.
“While wage gains, on average, have picked up slightly from the historical lows recorded at the onset of the pandemic, government income support has gradually unwound, and rental moratoriums have ended,” Oughton said.
“We may see more renters facing hardship as lockdowns continue, particularly among low-income, low-saving households reliant on government support.”
Compared to rent stress, mortgage stress is lower, with 42 per cent of mortgagees reportedly paying more than 30 per cent of their household disposable incomes on mortgage repayments.
“A recovery in economic activity, very low interest rates and the deferral of loan repayments by some households have helped contain mortgage stress,” Oughton said.
“Furthermore, households are well ahead of their minimum repayments and have significant net equity or savings in their home loans.”
Recent analysis by Corelogic suggests servicing a mortgage is now cheaper than paying rent on 36.3 per cent of Australian properties, which is higher than the pre-Covid proportion of 33.9 per cent reported in February last year.
