John Howard and Kevin Rudd's bursts of campaign trail largesse in the form of promised tax cuts will no doubt help those who have large mortgages.
But for many families, the extra money looks likely to be eaten up quickly if the rental outlook is any indication.
According to industry commentator Michael Matusik rents will rise rapidly over the next three years to 2010.
Some households spend 26 per cent of their income on rent, not substantially more than the 25 per cent they spent in 2004, he says.
Rent hike coming
But with fewer housing starts over the next 12 months, and with low vacancy rates already well documented, Matusik anticipates an average increase of 35 per cent in rents between now and 2010.
“The largest increases are expected to be in Melbourne (50 per cent), Sydney (40 per cent), Brisbane (30 per cent) and Canberra (25 per cent),'' Mr Matusik says.
”The current weekly median rent of $275 for a three-bedroom house could be as high as $365 by June 2010.''
Mr Matusik thinks rental growth will be sluggish during the 2008 financial year. But as tenants move less frequently and renters absorb spare bedrooms, the rises will really kick in. Will this create another surge of investors, which in turn will push property prices even higher.
Most capital cities have very low vacancy rates and increasing rentals, but higher purchase prices across Australia now mean buying an investment property is a much larger commitment.
Yields not giving
For many would-be investors, spending money on their own house without the worry of an additional large mortgage seems more appealing. In many areas yields still haven't reached a level that will attract investors en masse.
Take, for example, Canberra, which has a rental figure of $350 a week for a three-bedroom house.
On a median house price of $428,000, the gross return is only 4.25 per cent.
In Sydney the average weekly rent for a three-bedroom house is now $280. The median house price is $525,500, giving a gross return of 3.26 per cent. The gross return obviously doesn't include the benefit of negative gearing, nor does it account for outgoings, all the costs and charges associated with owning a property.
The exception is probably Melbourne, where CBD yields are reportedly now about 7 per cent, and in the inner city 5 per cent.
Demand from both young owner occupiers and investors has already led to substantial median price jumps for apartments in suburbs such as South Yarra, West Melbourne and Richmond. There is limited supply and pre-sales are strong.
Around the country, apartment prices are recovering after years in the doldrums, particularly in Sydney.
Recent figures from researcher RP Data show that the pace of growth in apartment prices is pulling ahead of house price growth.
It's impossible to tell where interest rates, prices and yields will be in 2010.
But it's likely any extra money will be small change to anyone -- renter or buyer, over the next three years. Source: The Australian
