Half of households are in rental stress

By in Australian Property

| 59 comments

By Martin North, cross-posted from the Digital Finance Analytics Blog:

According to the latest modelling from Digital Finance Analytics, around half of all households in rental accommodation are struggling to pay their rent on time.

Across all households, more than 30% are renting, and this has been rising as the costs of property escalate, mirroring the rise in mortgaged households.

Within the rental sector, around half are fine, but 37% are in mild rental stress (meaning they are making their rental payments by cutting back on other spending, putting more on credit cards and generally hunkering down). An additional 13% are in severe rental stress (meaning they are struggling to pay their rent on time and are likely to fall behind). We look at total cash flow, not a set proportion going on the rent (e.g. 30%).

Static incomes, underemployment and rising costs of living all add to the pressure, despite an overall fall in rental yields.

There is a strong correlation between rental stress and the proportion income going to make rental payments.  In some cases of severe stress, there is not enough income from all sources directly to cover the rent, and they are forced to borrow to fill the gap, or use savings.

We can also look across the rental sector by our household segments. Seniors are most likely to be in severe stress, but other groups are also being hit by rental stress. Many wealth seniors are tapping into savings to survive but stressed seniors do not necessarily have this option.  Fuel bills are a particular concern for many.

This analysis shows that we cannot just focus on housing affordability for owner occupied purchasers; housing policy must also cover the rental sector, where the supply of affordable rental property is a major issue. Once again joined-up strategic thinking is required to tackle this intractable problem.

Comments

  3. Steernorth

    Great isn’t it.
    The boomers and their Chinese mates with their property investments not only pricing youth and would-be FHBs out of the market, but gauging them via high rents – because they can.
    Fuck them both.
    We need a revolution in this country before countless younger people live in squalor.

    • TMEMBER

      Get up , Stand up . Stand up for your rights!✊
      Bob Marley
      Boomers are a joke! Fucken sell outs! Death to them.

      • Steernorth

        Oh deary me.
        Being born brainless must be tough enough.
        Being a complete and utter knob however must be unbearable.

      • TMEMBER

        All the Boomers i know and work with are Greedy fuckwits who couldn’t give a shit about their kid’s, grandkids or Australia once they fuck off and die(can’t come quick enough with attitudes like this ). They want it all. Tell you how much overtime they used to get , how easy to get jobs ( leave 1 Friday and start 1 Monday ) How cheap fuel , food , ciggies , grog , houses were. They deserve nothing less then a slow painful cancerous death!!! Grubs

      • AuRules

        @ T – – Doesn’t say much for the people you know. Anyway you sound like a real Dick just like your mate. Wanker.

      • Even StevenMEMBER

        @ AuRules

        The blame levelled against Boomers is certainly a generalisation. No question. But it’s not undeserved.

        I have no axe to grind. I have a home and am comfortably well off. In virtually all my discussions I have been less than impressed by the lack of acknowledgment that there is even a problem. Wilful ignorance? Selfishness? Comfortable ambivalence?

        Something has happened. Perhaps the first generation not to give a crap about whether the next generation will live in a better world.

        Sure, it’s not all Boomers. But it is a lot of them.

      • greedypuppyMEMBER

        The haves and the have nots transcends generations as well as characterizing them -plenty of poor boomers who are being screwed as much as their gen Y counterparts. The visibility of homeless people in Sydney has now become commonplace beyond those parts of the CBD (the Cross, Darlinghurst and Hyde Park) which were always beacons for homeless people -Newtown/Enmore/Erko/St Peters on any weeknight has folks of all ages sleeping rough or in cars.

        Every single Domain fax article glorifying the newest high price point should be matched by one explaining how the young the middle aged and the elderly with fewer means and resources are being tipped into poverty. This madness has gotta stop

    • AuRules

      @ SN — (Serial Nuisance)
      You’d be the expert for sure — A Knob, Brainless & Big mouth.

    • steve99

      Except for one small thing.. Gen X is a bigger property hoarder than BBoomers, both ownership of flash houses and speculative property. They also have a more dogged belief in it as a permanent for life money making scheme. Gen Y are now getting into it..
      As for Boomers and easy peasy jobs, dont know many of those that could job hop on a friday to monday basis as we had a couple of massive recessions in the early 80’s and early 90’s, far worse than today. Was easier though starting out in work but never really easy for most. Most Boomers I know are dead against house price inflation and in fact worry more about their kids grandkids than GenX do (like my house price speculating ‘Joe Hockey’ lookalike talk-alike brother in law)
      Also many were tossed out of work long before they will get the state pension but not enough superanuation to make a difference,, and Im talking 15years or more on the dole or part time McJobs (First tranche of GenX is now getting a taste of this).

  6. Owen

    It’s because we’re not paying bearded and tatted up baristas $50 an hour with full benefits.

    • NikolaMEMBER

      you are probably right to a point but see comment below by greedypuppy – Sydney is really bad. Even 6 figure salary will not help you – for some places. Here at work every single (single like not married) person that is renting is sharing as none of them can afford to rent on their own. And all of them are on $150k plus..

      • VirusMEMBER

        Looks like every Tom,Dick and Harry is on $150K+ salary except me!
        What industry/domain are you in? What are the type of roles these good-looking people are working in/as?

      • greedypuppyMEMBER

        Nikola – I have a number of friends in their mid forties all on over $100k who are in this situation. They simply cant get a deposit together while they are crippled by high rent and rising prices-few folks want to be in a share house in their mid to late forties. Its just insane.

      • boyracerMEMBER

        Nikola,

        “Sydney is really bad. Even 6 figure salary will not help you – for some places. Here at work every single (single like not married) person that is renting is sharing as none of them can afford to rent on their own. And all of them are on $150k plus”….

        I don’t buy that. $150k a year is $2,000 net a week. You can get a decent 2BR unit in, for example, Ashfield/Burwood for $500-600/week. That still leaves you with $70k+ in after tax income per annum and those places are not too far from the city and near train lines etc. Some of them will have HECS etc which reduces their disposable income but to say they can’t rent on their own is a bit rich.

        Eastern Suburbs is expensive (I lived there 15+ years) but $700-$800/week will get you something decent which is able to be paid for by somebody on $150k – although I won’t argue it is a big chunk out of their after tax salary and far more than I’d want to spend if I was single – so sharing absolutely makes sense if you want that beachside lifestyle.

        I agree Sydney rents are far too expensive but not for somebody in the top 10% of earners. For the majority of people earning around the median salary it is stupidly expensive and that is where our main concern should be.

        Just my 2c.

      • scootytootyMEMBER

        The older generation are saying “Damn kids sharing rental accommodation so that they can afford the latest i-phone or electronic thingy. BUY MY HOUSE FOR 10X WHAT I BOUGHT IT FOR ALREADY!!!”

      • GavinMEMBER

        @Patone – If you are earning six figures and can’t rent alone you suck at money. Hard.

        Not quite, it’s more that if you have to pay high rents, it’s hard to save a deposit and a deposit that keeps moving up (if you want to pay down 20%). So you need to save $200-$400k for a regular old house in the Inner West. That just qualifies you for a mega mortgage. Then there is the next 30 years of repayments.

        How many people think they can always earn $150k a year for the next 30 years? I certainly am not betting on it myself.

  8. greedypuppyMEMBER

    Average cost of a 2 bedroom semi in Sydney’s Inner West is $700 pw. No wonder renters are struggling and fearful of growing old without owning a home. This is only going to worsen. Sydney has eaten itself in this frenzy of speculation and ridicule of those who have missed out.

    • NikolaMEMBER

      did not read the article but I am guessing this is equity and inheritance they are talking about – time to buy new boats, jet skis, oladays, cars, new Gretsches and Gibsons, Pateks..

    • Ino

      Well – likely if what you sit on is shaped like a b*tt-pl*g – it might as well feel like a mountain – or so the legend goes.

    • GibboB

      From the article “Cash and deposits alone topped $1 trillion last quarter for the first time on record”

      Will be handy when it comes to the bank bail-in.

    • tonyddMEMBER

      Cathrine or Janet ? I am reading the book recommended Pillsbury. Interesting thanks .

      • mild colonialMEMBER

        I meant ‘one of two Cathrines’. Janet was around in the last few weeks. I didn’t recommend this book, so someone is still lurking.

      • two plus twoMEMBER

        My offset is a transaction account I expect it’d be classified as savings. I very much doubt the money in an offset account could be classified as ‘principal repaid’ as the balance of the offset account doesn’t affect the loan’s balance like extra repayments would.

    • Switters

      That article is total BS. They might as well have written ‘all Ponzi schemes work well until there are no more new greater fools entrants.’

  10. V

    The whole system is eventually going to blow. There is sweet FA going on in the Australian economy outside of ponzi industries and sectors reliant on the government. As soon as the crunch goes on discretionary income it’s all over.

    • steve99

      If/when the ponzi industries get whacked then there will go the big salaries. Banking, Acounting, real estate nonsense, city law, IT job in related industries must account for 75% of these big buck wages.

  11. BigM

    In the Bay Area San Fran almost 46% of millenials want to move. And many will. Traffic congestions (mate just came back, said bloody horrible) high housing prices etc. Sounds like Sydney and Melbourne. Why would you stay?

    • GavinMEMBER

      I was there a couple of times last year, it’s horrible alright. But I’m lucky company I work for has buses that ferry you out to outer suburbs. You still have to wake up at 6:00am to catch it to arrive by 8:45pm however. Then you work work work work work, until the end of the day, get a bus back into the madness that is SFO and pretend to have a night life before going back to your $2,800 USD p/month studio apartment (my friends place who works at the same firm) and call it quits for the night. Rinse and repeat the next day, then you get a 2 day weekend to do whatever you like. Which mind you I do like SFO as a city to visit. But as to live… no farkin’ way…

  12. Cornflakes

    It starts to resemble the French Ancien Regime. The nobility who can’t be taxed sit a top the pile relying upon wealth generated from property which burdens society to such an extant that the country is not able to innovate. France had a bigger population than the UK and had basically the same type of natural resources, yet were unable to begin the industrial revolution under the Ancien Regime.

    • J BauerMEMBER

      At least the French elite knew how to use cutlery properly, unlike our nouveau riche.

      • Cornflakes

        True. But the french nobility did other things which disgusted the masses as well (their immorality was high).

  13. armchair economist

    whats all the carry on about…didnt we report today the manufacturing PMI was going gang busters in austrlia and that services PMI is doing pretty good too….as technologt progresses there is less room and less enjoyment for people who dont have the intellect/skills to contribute. I mean if the only thing you can contribute is sweeping floors, then you’re days are numbered. My roomba does a pretty good job.
    Australia is doing great,manfacturing rock solid (just not in turn of the century industries like cars, steam engines, coal power plants, etc) services are rock solid…specially in human services whic are hard to replace….I cant get a booking into tenminutesbytractor or ezards cos its they are constantly full…restaurants are doing fine too…so the people on this blog are the only complainers.
    Plus we have high house prices because people like living in australia, clean air, clean water, great environment, that all has huge appeal. Tasmania might be a backwater now…but just wait until mainland turns into a dunmpster like beijing or shanghai…then their environment wll be desirable….and worth a fortune…there is no active constraint on the human population and house price pressure is evident in every economy..therefore the only thing to do for your children is to buy land and more land and more land….