Brisbane rents to increase by 30 per cent

Shannon Molloy | October 18, 2007 - 12:01PM

The tightening rental market in south-east Queensland is placing many renters under pressure, but one property analyst believes the majority aren't as stretched as it seems.

At present, the average price of a three-bedroom home in Brisbane is higher than Sydney and Melbourne, because they are closer to the CBD and facilities.

However Michael Matusik, from Matusik Property Insights, believes most renters have the ability to pay more.

And they had better - the average weekly price for a three-bedroom home is expected to rise 30 per cent over the next three years.

In Brisbane, rental vacancy rates have fallen to about 1.5 per cent as a severe undersupply of new residential developments continues to bite.

Renters in Brisbane currently spend about 27 per cent of their income on rent, with the average price of a three-bedroom house sitting at $290. In Melbourne the average price is $250, while in Sydney it's $280.

Mr Matusik believes the average rental price gap between Brisbane and other capital cities would begin to even out over the next three years as an undersupply in Sydney and a job boom in Melbourne point to rent rises.

Brisbane's new house stock is likely to be built some distance from the CBD and work centres, so the potential for rental growth is likely to be less than Sydney and Melbourne, he said.

He predicts the weekly median rent for a three-bedroom house in Brisbane could be as high as $375 by 2010.

It is the latest bad news for renters, who have been struggling with increasing prices and plummeting vacancy rates since the market began to dramatically turn three years ago.

Statistics released from the Real Estate Institute of Australia show a 25 per cent rise in residential rents across Australian capital cities in the past three years.

Back in 2004 vacancy rates for residential properties were close to four per cent and there was a slight oversupply of new housing across many urban areas.

With fewer new houses to be built over the next 12 months, in addition to an already low vacancy rate, the situation is about to get a lot worse.

But thanks to the changing habits of tenants, the next round of sharp rises isn't expected to hit for another year.

"We envisage that rental growth, however, will be a bit sluggish during financial year 2008 as renters absorb spare bedrooms and take longer leases," Mr Matusik said.

"There is evidence that tenants are starting to stay put rather than move, as shown by the decline in new bonds held across the country."

However he predicted rents would again boom in 12 months.