 |
Rental nightmare takes its toll
|
Record low housing affordability and soaring rents are putting many Australians
under huge financial pressure – especially those aspiring to buy their first home. But the roll-on effect is reaching much further than people's pockets.
According to the March 2007 figures from the Housing Industry Association (HIA) and Commonwealth Bank, housing affordability is at its lowest since they established an index in 1984.
This means the average Australian first home buyer needs more than 30 percent of their disposable income to make the minimum monthly repayments on a new mortgage.
"The yawning gap between what households need to pay and what they can afford is keeping a large number of would-be-home-owners out of the market and seeing them stuck with renting," says Simon Tennent, HIA Executive Director – Housing and Economics.
"This, combined with the fact that not enough new homes are being built to cater for Australia's housing requirements, means that the pressure isn't likely to ease up anytime soon.
"The high demand for rental accommodation is even resulting in 'rent auctions' in some places. It's becoming increasingly common for would-be tenants to offer extra money or rent in advance with the hope of securing a place to live. In fact rental vacancy rates are at a 25-year low, making it very hard for people to find affordable accommodation," says Simon.
Renter's wellbeing under stress
High rents are likely to be having a more profound impact on many people's lives rather than just tightening their budget.
A recent Australian Unity Wellbeing Index survey has revealed that worrying about rental payments has a significant effect on wellbeing.
On average, people who have to worry about rent have a wellbeing score of 69.2, compared to 74.4 for those who have a mortgage, and 77.2 for those who own their own home.
Author of the Index, Professor Bob Cummins from Deakin University, says the drastic impact on renters' wellbeing has as much to do with relationships as it does money.
"A higher proportion of renters are single so they don't often have the assurance of additional financial and emotional support provided by a stable partner.
"It's this compounding effect that makes stress about rent such a powerful influence on how people feel about their lives," says Bob.
Australian Unity 's Group Managing Director, Rohan Mead says that these findings are of particular concern given the current state of the housing market.
"Although some people choose to rent as part of a deliberate investment strategy, many Australians are renting because they simply can't afford to buy," he says.
"With housing affordability at a record low and increasing rental costs, saving for a home will get even harder for people in this situation.
"Today's rental market means Australians are increasingly being forced into paying a higher proportion of their income on rent than they ideally should, creating huge stress for thousands of people.
"This is an issue that Government and industry need to monitor closely, to ensure that appropriate support programs can be put in place."
The survey also found that renters have a lower level of wellbeing than those who have a mortgage, regardless of
their income level.
"The findings do not mean that getting a mortgage will make you happy, and people certainly need to take on mortgages that are within their reach," says Bob.
"But compared to people who are paying rent, those paying off a mortgage do have a higher level of wellbeing. This is true at all levels of income."
Commuting
Naturally, when you want to buy your own place, you find ways to compromise in order to make dreams a reality. This may involve lowering your ambitions from a house to an apartment, looking in a different area, or renting longer in the hope that affordability will improve.
The distance and ease of travelling from home to work should be seriously considered when making these choices. This is because the amount of time spent commuting has an impact on your wellbeing.
"Although commuting times don't have a drastic effect on wellbeing, you really don't want to be travelling more than one hour each day," says Bob.
"At this stage wellbeing is still within the normal range – but only just – which makes people vulnerable to other stressful factors in their lives.
"When purchasing a home, commuting times are certainly something to consider. The highest wellbeing was found to be in people travelling less than 10 minutes per day – if you're doing that, you're doing well."
Rural relocation
Simon says the price of homes in many of the nation's capitals appears to be forcing people not just into different suburbs, but also out of the cities.
"We're seeing an increasing number of first home buyers relocating to non-metropolitan areas. That's ok if it's what you want. Plus it's very beneficial to regional economies.
"But it's a real concern if you are moving because you feel it's the only way you'll be able to buy a home."
The underlying problem driving costs up is lack of supply. According to the HIA, there's not enough houses to go around, particularly at the lower end of the market.
"Not enough new homes are being built, so with a growing population, more thought and work needs to be directed towards where we're all going to live," says Simon.
"This issue has big implications for public housing. People with a bit of money may, in time, be able to stretch a little further to get the home they want, or they can choose to compromise on a couple of 'extras'.
"But people who are already struggling to make ends meet have very few options left. The tighter the housing shortage becomes, the greater the pressure on public housing provisions, not just the private sector.
"The shortage of new housing is not a problem that will simply be fixed by interest rates staying steady or house prices being relatively stable. Government policy action is required to reduce the fees, taxes, and charges levied on new housing, to encourage building and investment in new homes."
Transition from rent to mortgage
When making the big leap from renting to owning, one common headache for a lot of people, is choosing a home loan. With dozens of lenders and hundreds of home loans available, it can be a confusing time. One way to help make sure you're getting the best deal, is to enlist the services of an Australian Unity mortgage broker. Our broker will sit down with you to establish your needs, and then negotiate on your behalf with the banks and other lenders to find you the most appropriate loan at a very competitive rate of interest. And before you wonder what the catch is…there isn't one. Brokers are paid on commissions from the lenders, out of the lender's profits. So our mortgage broking service is completely free for you. |
|
|
|
