Rising interest rates to hit renters hard

By Nick Gardner, From: News Limited newspapers, 26 April 2010

Rising interest rates to hit renters hard

By Nick Gardner, From: News Limited newspapers, April 26, 2010

INTEREST rate rises during the next two years is going to hit tenants hard as the cost of escalating mortgage payments is passed on to tenants.

TENANTS can expect to pay out an extra $5 billion or more in the next two years as landlords push up rents to cover spiralling mortgage costs.

Property analyst Residex and the country's biggest real estate chain Ray White say the Reserve Bank's lifting of interest rates is flowing straight through to the rental market.

A shortage of available properties and increased population are adding to the rate pressure, with weekly rents expected to rise between $40 and $100 in the next two years.

"Every force in the marketplace will be driving rents higher,'' Ray White director Ben White says.

"The mortgages of rental property owners are becoming more expensive, so it's inevitable that this will result in rents going up,'' White says.

There are about 2 million rental properties in Australia and if rents increase an average of 7 per cent it will push them up by about $20 a week this year, according to Ray White. However, property analyst Residex paints a bleaker picture.

It expects rents to rise more rapidly, predicting Sydney will be hardest hit, with rents expected to be $108 a week higher in two years, while Melbourne rents are expected to be $71 a week more expensive by 2012.

Rents in the other states are all forecast to be higher by more than $40 a week within the next two years, Residex chief executive John Edwards says.

A rise of $50 a week is forecast in Hobart; $47 in Adelaide and $46 in ACT.

"It's a perfect storm because while rents are rising, tenants are suffering but in most cases the increases in rents won't be enough to cover the higher mortgage repayments,'' Mr Edwards says.