Allan Qi did not intend to become a real estate investor.
The 32-year-old bought an apartment in Sydney’s western suburbs to live in six years ago, but became a landlord when he moved to Melbourne.
But he’s also a renter and has lived in the same house in Melbourne’s eastern suburbs for five years.
The apartment is negatively oriented, so the rent he receives doesn’t cover the mortgage payments.
It’s a struggle to balance the budget
With a household income of about $90,000 a year, technology and design teachers Allan and his wife Juan are already struggling to keep up with their spending.
They are worried about how high interest rates could go.
“Very, very nervous, very worried about the future,” Mr. Qi said.
Their investment loan is currently frozen, but when that ends, Allan says they’ll have to raise the rent or sell.
At the same time, he does not know what his landlord will do.
“I tried to avoid it [putting the rent up] Just because I’m a renter myself, I understand that we’re all struggling a bit,” Mr. Qi said.
“But because that interest rate is going to go up quite a bit, I’ll have to pass it on to continue surviving.”
The rental market is already in crisis
Many of Australia’s 2.8 million renters will fear just that, says Edwina MacDonald, acting chief executive of the Australian Council of Social Services (ACOSS).
“People are really afraid of what rising interest rates are going to mean for renters, that landlords are going to pass on the rising interest rates to renters.”
After years of record-low interest rates, the Reserve Bank began raising official interest rates in May to combat rising inflation.
Fixed rates are already rising.
And there are plenty more rate hikes to come, with RBA Governor Philip Lowe saying the cash rate could reach 2.5 percent (or beyond, some economists are predicting).
That means many of the variable rates that lenders charge borrowers could reach about 5 percent or more.
It’s difficult to pinpoint exactly how much interest rate hikes have affected rent increases so far, especially since rents can increase at different stages of the year. But the prices keep going up.
“Since the first interest rate increase in our rent index, rents nationwide have risen by a further 2.4 percent,” says Louis Christopher from SQM Research.
The rental market has been tight for months. National vacancy rates are just 1 percent, the lowest in 16 years.
“The market is really tough right now,” said Joel Dignam of Better Renting.
“The amount of rent [increases] that we are seeing and the inflexibility of landlords is quite worrying.”
Rents are rising nationwide
The lowest vacancy rates are found in regional coastal areas, including the Gold Coast, northern New South Wales and Victoria’s Mornington Peninsula.
People have moved to these places during the pandemic, but there just aren’t enough homes.
A lack of supply has pushed up prices across the country — the national median rent is $510 a week.
In Canberra, Dom Craddick packs up his home in the inner north.
He and three roommates have lived there for the past six years, but in May they received an email from their agent saying the rent would go up $50 a week to $900 — the biggest rent increase they’ve seen ever had.
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“We said we wouldn’t pay more than $20 [extra] per week, that’s how much our wages have grown over this period,” said Mr Craddick.
“Now we’re moving out.”
But he’s one of the lucky ones who was able to find another cheaper house.
At a time when everything from groceries to gas to energy is on the rise, many are being pushed out of the rental market, says Edwina MacDonald.
“Right now we are at this point of crisis in the housing, rental and social housing markets,” she said.
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