Many tenants fell into "rental stress" during the first half of 2021, as they devote a substantial portion of their income to rent.
The latest ME Bank study found that over two-thirds of tenants experience rental stress in the six months through June 2021.
A common way to measure rental stress is to determine if a tenant spends more than 30% of their pre-tax income on rent.
Interestingly, the average proportion of household income spent on rent for the period was 41%, which represents an increase of 8%.
The level of rental stress over the six-month period was higher than the last six months of 2019, before the COVID-19 pandemic.
ME Bank consulting economist Jeff Oughton said the worrying levels of rental stress were due to the continued tightening of rental markets which pushed up rental prices.
“Renters are now facing some of the biggest rent increases since the global financial crisis,” Mr. Oughton said.
A recent report from CoreLogic showed that the annual pace of domestic rental gains climbed to 7.7%, the highest since 2008. Darwin and Perth were the tightest rental markets and have recently seen substantial increases rents.
Mr. Oughton stated that income was not able to keep pace with rents. Some of the most vulnerable tenants are those with lower income (less than $ 40,000 per year) and below average ($ 40,000 to $ 75,000 per year).
"While wage gains, on average, have risen slightly from historic lows at the start of the pandemic, government income assistance has gradually been phased out and rent moratoriums have increased. ended, ”he said.
“We could see more and more tenants facing hardship as closures continue, especially among low-income, low-savings households reliant on government support. "
The most vulnerable segments also include single-parent families, couples with young children and retirees. During the period, more women (75%) were in rental stress than men (60%)
Cheaper to buy than to rent?
The study also indicated that the share of troubled tenants over the period was actually higher than the proportion of distressed mortgage holders.
In fact, only 42% of borrowers reported setting aside more than 30% of their household income for mortgage payments.
Mr. Oughton believes that current conditions are more favorable to buyers than to tenants.
"A recovery in economic activity, very low interest rates and the postponement of loan repayments by some households have helped contain mortgage stress," he said.
“In addition, households are well ahead of their minimum repayments and have significant net capital or savings on their mortgage loans. "
A separate study from CoreLogic found that managing a mortgage is cheaper than paying rent on 36.3% of properties.
Eliza Owen, Head of Residential Research at CoreLogic, said the low interest rate environment is still conducive to better mortgage affordability in many parts of the country.
"The scan is a good reminder for tenants to weigh housing costs and savings, to see if it's time to change tenure," Ms. Owen said .
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