Families struggling to find affordable rental properties in Perth have been dealt another cruel blow amid news of the largest interest rate hike in more than 20 years.
The Reserve Bank of Australia’s surprise Tuesday announcement it would be increasing the official cash rate from 0.35 per cent to 0.85 per cent is expected to filter down to tenants as landlords find themselves under pressure to pay their mortgages.
According to realestate.com.au, there are less than 1600 properties available for less than $500 a week across the metropolitan area, and prices had already begun tracking upwards before the RBA’s decision.
An April review by CoreLogic revealed median rents were already up 2.2 per cent last quarter, and up 5 per cent this year in Perth’s most affordable suburb to rent Midvale at a median of $371 a week.
Prices have also risen in the subsequent four most affordable rental suburbs, with Armadale’s median rentals rising to $376 a week, followed by Medina ($383), Mandurah ($387) and Kelmscott ($371).
However, Real Estate Institute of Western Australia president Damian Collins said tenants could take heart the news was not as dire as first thought.
“In the short run, the rate rise won’t mean anything for tenants,” he said.
“Rents are set by demand and supply. Right now there is a rental shortage and that’s why rents are up.
“But landlords can’t just put rent prices up whenever they want. Most leases are set for 12 months, but even if the lease runs out it’s still about demand and supply.”
While Mr Collins appreciated it was difficult to secure a rental property, he said REIWA members were reported to be leasing an average of about 700 properties each week alone.
If locals don’t enter the market the east coast might.
“What might happen is that with interest rates going up investors might shy away from the market, which will put pressure on the supply of rental properties,” he said.
“But there’s quite a bit of interest in Perth properties by investors on the east coast, so if locals don’t enter the market the east coast might.”
But there appears to be little relief on the horizon for tenants hoping to break into the property market, with interest rates tipped to continue to rise to 2.1 per cent by the end of the year.
The largest rate hike in more than 20 years has economists revising their forecasts, and comes after RBA governor Philip Lowe in May said a 25 basis-point hike was a signal of moving towards “business as usual”.
National Australia Bank chief economist Alan Oster on Wednesday said Dr Lowe’s language — alluding to no need for extraordinary economic support introduced in 2020 — suggested the RBA board wanted to “shift the cash rate closer to neutral as soon as possible”.
Dr Lowe has suggested a 2.5 per cent official interest rate was “close to neutral”.