How high can rent go?

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More and more rental homes are costing tenants more than 30% of their gross household income, according to a recent study by realestate.com.au. The catch? People find the prices reasonable.

New South Wales (NSW), at 43%, showed the highest percentage of renters who are experiencing “rental stress” – in which rent eats up for more than 30% of income. Victoria, Australian Capital Territory, Western Australia and Tasmania, at 40%, tied for the second spot. They were followed by South Australia (39%), Queensland (36%) and Northern Territory (23%).

The rental stress rate for people earning $500-$1000 per week was 64% in Sydney but only 37% Melbourne.

High-stress rental regions (60-70%) in Sydney include Greater Western Sydney and Hawkesbury, while areas in the Upper North Shore and Southern Sydney were in the 40-50% range for cases of rental stress.

Melbourne’s outer regions, including the Yarra Ranges, Hume, Mornington and Macedon Ranges, were all areas with high rates of rental stress.

“People living in low-income areas are more likely to be under housing stress. Particularly in Sydney, which is the most expensive city in Australia,” Realestate.com.au’s Chief Economist Nerida Conisbee said.

There are some social factors that can drive the strain, according to Conisbee.  For instance, renters are usually younger and have lower income than buyers. However, in Sydney’s case, rents simply eat up a significantly larger portion of the average wage. This is why more people are renting and sharing.

Realestate.com.au’s report revealed, though, that rental stress doesn’t seem to bother many tenants. While it is becoming rampant, 72% of the respondents said they had no issues with the amount of rent they pay and believed the pricing was fair.

Nerida Conisbee, Realestate.com.au’s chief economist, said a lot of renters are glad to pay more for a quality lifestyle and amenities.

“Young people are the most likely to rent, and they generally do it before they buy a home, so tend to choose places that are fun to live. Often they will rent in a far more expensive area, but then buy in cheaper areas. So, they’re aware they’re paying higher rent but don’t have an expectation of staying in the area too long, so see it as a fair price to pay for the lifestyle,” she said.

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