Rental properties in Australia’s capital cities have become too pricey for low-income tenants, new research shows.
Anglicare’s rental affordability snapshot revealed that some Australians families are spending up to 60 percent of their income on rent, forcing them to sacrifice other essentials such as food and health care.
Kasy Chambers, executive director of Anglicare Australia, told ABC News that of over 65,500 private rental properties surveyed as part of the study, very few were deemed affordable for low-income earners.
“We found that virtually none were affordable for people living on government benefits and on the minimum wage,” she said.
In Perth, for example, there were no properties deemed affordable for those groups and in Sydney and Melbourne there were less than 40 surveyed individual dwellings that were affordable.
“It wasn’t that different a story in regional areas, like Geelong and Newcastle, or even some of the rural areas either,” she said
Spending more than 30 percent of income on rent is considered “unaffordable” for low-income earners, according to Anglicare. Some families, spending as much as two-thirds of their incomes on rent are facing even greater pressures, according to Chambers.
“When housing is difficult it’s difficult to get work, it’s difficult to connect to community… and people are making very difficult decision about what not to buy and not to pay so that they can pay the rent,” she said.
“It shows that people on the minimum wage are not going to be able to buy into property when they cannot get into rental properties.”
Homebuyers also struggling
Meanwhile thousands of Australian homeowners are also doing it tough, as falling property prices erode much of the equity needed to move on to a bigger house or unit.
Home values have fallen in every major city by as much as 6.8 percent, with median capital city prices down 3.6 percent in the year to December 2011, according to RP Data. Regional property prices (median) dropped by 2.9 percent in that period.
Those most at risk will have bought in the booming property market of 2009 and 2010. But a significant portion of recent property buyers looking to sell up and move on, or refinance, could be in for a nasty shock.
Damian Smith, chief executive of RateCity, said we often hear about the plight of first home buyers, but there are a number of home owners doing it tough.
“Let’s say you purchased a unit in a major Australian city last year with a purchase price of $400,000. Imaging you took out a home loan with a rate of 7 percent and put down a deposit of 5 percent, so you end up borrowing $380,000.
“By the end of the first year, you’ve paid a total of around $30,400, of which around $5000 is principal – so your mortgage is now just under $375,000. But when it comes time to sell or refinance and you want to shop around, you may be in for an unpleasant surprise on valuation,” he said.
With a 3.5 percent decline in value a once $400,000 property is now valued at just $385,600 and around 3 percent equity in the home.