Families struggling to find affordable rental housing in Perth have been dealt another brutal blow amid news of the biggest rate hike in more than 20 years.
Tuesday’s surprise announcement from the Reserve Bank of Australia that it would raise the official cash interest rate from 0.35 percent to 0.85 percent is expected to trickle down to tenants as landlords come under pressure to lower their mortgages. Pay.
According to realestate.com.au, fewer than 1,600 homes are available for less than $500 a week in the metropolitan area, and prices started rising even before the RBA made a decision.
A CoreLogic review in April found that median rents were already up 2.2 percent last quarter and 5 percent this year in Perth’s most affordable suburb to rent, Midvale, for a median of $371 a week.
Prices have also risen in the next four most affordable rental neighborhoods, with Armadale’s median rents rising to $376 per week, followed by Medina ($383), Mandurah ($387), and Kelmscott ($371).
However, the chairman of the Real Estate Institute of Western Australia, Damian Collins, said tenants could take to heart that the news wasn’t as dire as first thought.
“In the short term, the rate increase means nothing to tenants,” he said.
“Rents are determined by supply and demand. There is a current rent shortage, so rents are rising.
“But landlords can’t just drive up rents whenever they want. Most leases have 12 months, but even when they expire, it is still a matter of supply and demand.”
Though Mr. Collins realized it was difficult to get a rental home, he said REIWA members reportedly rent an average of about 700 properties per week alone.
If the locals aren’t hitting the market, the east coast might.
“What could happen is that with interest rates rising, investors may shy away from the market, which will put pressure on rental housing supply,” he said.
“But there’s quite a bit of interest in Perth properties from East Coast investors, so if the locals aren’t getting into the market, the East Coast could.”
But there seems to be little relief on the horizon for tenants hoping to break into the real estate market, as interest rates are expected to continue rising to 2.1 percent by the end of the year.
The largest rate hike in more than 20 years has prompted economists to revise their forecasts and comes after RBA Governor Philip Lowe said in May a 25 basis point hike signaled a move to “business as usual”.
Alan Oster, the chief economist at the National Australia Bank, said on Wednesday that Dr. Lowe — alluding to the need for extraordinary economic support introduced in 2020 — suggested the RBA’s board “wanted to move the spot rate closer to neutral as soon as possible.”
Dr. Lowe has suggested that an official rate of 2.5 percent was “close to neutral.”