Rabu, 21 Januari 2009

Rents are up again, but...

Rents are in the news, with Australian Property Monitors (APM) presenting its figures on movements in 'asking rents' for houses and units for the quarter and the year to December 2008. According to APM, the median 'asking rent' for Sydney houses was $450, up 4.7 per cent for the quarter, and a punishing 16.9 per cent for the year; for Sydney units, the median 'asking rent' was $400, which was steady over the quarter, and up 8.1 per cent for the year.

That makes 2008 a tough year for tenants (as if readers of the Brown Couch didn't know already). But let's consider a couple of qualifications. First, APM's figures relate to 'asking rents' (and to give credit to APM, they make this clear) which APM gets from 'to let' advertisements. These are the rents that persons entering into new tenancies might expect to pay. They do not relate to the rents that tenants in established tenancies pay. 'Established rents' are lower than 'asking rents', for several reasons:

  • 'asking rents' reflect that the landlord has, in many cases, just given the premises a coat of paint and made other repairs;
  • because of fixed term agreements, 'asking rents' also reflect that the landlord won't be able to increase the rent for six or 12 months;
  • 'established rents' reflect the discount that landlords tend to give tenants who are a known quantity, as opposed to unknown new tenants (this isn't out of the goodness of their hearts; it is putting a price on risk).

Secondly, not only is the dollar amount of 'asking rents' higher, their rate of increase has recently been higher too. The Consumer Price Index (CPI) from the Australian Bureau of Statistics (ABS) reports on movements in rents, and its data crome from established tenancies. The most recent CPI report is for the September quarter: according to it, Sydney rents were up 1.8 per cent for the quarter, and 7.5 per cent for the year.

The next CPI report is due out next week: we'll see what it says about rents then.