Minggu, 17 Mei 2009

Rent and Sales Report no 87, part 2: tenancies and turn-over

The big news from the latest Rent and Sales Report, as discussed in the previous post, was the sudden drop-off in rents for new tenancies in the March quarter, after several years of increases.

There's another aspect of the Rent and Sales Report that hardly ever gets reported in the media, but here at the Brown Couch we find it pretty interesting. It's the number of new bonds lodged with the Rental Bond Board, and the number of total bonds held by the Board. Because just about all tenants in the private rental market pay a bond, the number of new bonds lodged is a pretty good proxy for the number of new tenancies starting in a given period, and total bonds held is a pretty good proxy for the total number of private tenancies.

The graph below gives both these numbers, going back to March 2003. The number of new bonds lodged jumps around a bit, but there's a rhythm to it (it's in time with the academic year) and if you look at the trend, the number of new bonds lodged – and hence new tenancies starting – is declining.

On the other hand, though, the total number of private tenancies in New South Wales has grown continuously over the period.

(Rent and Sales Reports, March 2003-March 2009. Click on image for a better view.)

What this tells us is that the turn-over of tenancies has declined; in other words, tenants are not moving around as much as they used to.

There's a number of possible explanations for this. Perhaps tenants generally are getting older and more settled in their homes. Without ruling out other explanations, I suspect the strongest is the lack of affordable housing, both for purchase and, especially, for rent. In the face of rising rents, many tenants have battened down the hatches and tried to weather the storm in their current residences - which led to fewer vacancies and, in turn, yet higher rents for new tenancies.

So, back to rents: if they are indeed starting to level off, or even come down, will tenants start moving again? Maybe – if you feel that your income is secure you might think about venturing out into the market again, and you might even find a few reasonably-priced high-quality premises to let from credit-crunched investors who need the cash. But for those tenants who are not so secure in their employment, the storm has not passed yet.