A few Good Tenants

I note with a lack of surprise that rents are set to rise again in 2007 in NSW. This I can understand. As investors turn to the tax benefits of superannuation and the booming share market, there is less money being invested in Property. As there is less money, there is less property available to rent being bought on the market. As the demand for rental property increases, so do rents. Basic Supply and demand curves.

It’s just the amount of the increase that is a little crazy. The Sydney Morning Herald is quoting a source at the Real Estate Institute of NSW who believes rents will increase by 20% this year. 20%! That’s an increase of 1/5. These are crazy figures when you consider inflation is running at 3%.

The worse thing about this claim is that it just appears to be a random belief. There does not seem to be any evidence backing this up.

Here at the goat, we like to get some stats to back up our theories. So I went to the real estate institute of nsw web site. ----------à http://www.reinsw.com.au/
In the news sections, there are a couple of predictions for the year ahead, neither of which quotes a 20% increase in rents. In one article, the institute quotes a BIS Shrapnel report which states a 10% increase each year for the following 3 years. This is a fair enough claim as rents went up last year 9.8% last year (a reasonable figure when you consider CPI was at 2.8%)

So it seems that it is just a pie in the sky claim. Nice. Now I can’t fault the Institute. Basically they are a lobby group for real-estate agents in NSW. No harm in that. But I can’t believe the Sydney Morning Herald reported on it. My issue is that the 20% claim becomes a self-fulfilling prophecy. Landlords will read the article and say "Rents will increase by 20% this year? Why not?". Not good for the renters out there like myself.

There is a silver lining to this cloud however. A lot of us renters actually have enough cash to buy, but are waiting for the right time to purchase our abode. If it gets to the stage where rents are so high that it makes economical sense to put money to a mortgage instead of rent, these landlords will loose a few good tenants.