Breaking news: Everything’s unfair and needs fixing. Oh, you want me to be slightly more specific? Fair enough.
On July 31, the financial services company CoreLogic reported that the value of Aussie dwellings fell on average by 1.3 percent in July. This is the third consecutive month that this price-point has dropped. “Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis in 2008,” explained this organisation’s director, Tim Lawless. So, if you need to sell your house at the moment, the timing might not be fantastic.
However, Domain’s June 2022 Rental Report paints a very different picture for renters. When comparing rental prices to what they were in March, the only capital city that didn’t experience an increase was Darwin. This means while house prices are falling in a whack of places around the country, the rental market is still a cricket bat to the chest.
But why is this happening? What has led to such a domestic kerfuffle? Well, get your mental parachute ready, because we’re about to jump into the Australia’s housing abyss:
Landlords Are Passing Interest Rate Costs Along to Tenants
In June, the interest rate increased by 0.85 percent. This was bad news for homeowners and potential homebuyers. As the treasurer Jim Chalmers said, “For an average mortgage of $330,000 remaining it’s about $87 a month that Australian homeowners will have to find. For an average new mortgage, it’s almost twice that at about $157 a month.”
Higher mortgages scare off potential homeowners, which then lowers house prices. This is because there’s less demand for a thing, the lower its price might have to be. However, if you already are a landlord with a mortgage or five, would you want to pay an extra slab of cash to the bank each month? Or, would you rather pass that cost down to your desperate tenants by raising their rent?
It’s hard to argue that this isn’t exactly what is happening. As Impact Economics’ Lead Economist, Angela Jackson, said to the ABC, “While renters are not directly impacted by rate rises, [it] may lead landlords to increase rents to recoup higher interest costs.” But when landlords jack up the prices, it only exacerbates the rental crisis that we find ourselves inside of.