Rents set to surge in investor dominated property market

A new report from Australian Property Monitors (APM) indicates that rising interest rates and property prices are forcing more potential owner occupiers into the rental market, which is causing a renewed surge in rents.

Median rent in capital cities grew 1.5% in the March 2010 quarter, compared to just 2% growth for the whole of 2009.

“Affordability is once again the major issue restraining potential homebuyers moving from rental accommodation to ownership,” said APM economist Matthew Bell.

The long-term average increase in rents is 6 – 7% per year for houses and 7 – 10% for units.

“As the economy continues to improve, rents are expected to get back to and exceed those levels,” Bell said.

Darwin saw the biggest leap, with house rents rising 10% in just three months. Melbourne’s 2.8% quarterly increase was its first in 18 months. While rents in Sydney and Canberra remained flat in the March 2010 quarter, they are expected to take off soon.