In recent times, the needs of renters have seemingly changed. With housing affordability becoming a large issue in metropolitan areas, more and more renters are looking for longer term solutions to their affordability problems.
In March 1980, the nominal median house price in Sydney was $64,800. Melbourne was $40,800. Looking at those numbers may cause dizziness in prospective buyers of today, particularly when looking at the figures when they have been adjusted for inflation.
It is certainly clear that owning your own home has become more of a challenge in recent years. Currently in Australia, the rate of home ownership is 66.7%, the lowest level since the mid-1950s.
So instead of owning their own homes what are people doing?
Long term leases
For many renters, the prospect of staying in the same place for a long period of time can be a very appealing one. It can allow them to put down their roots and really make a home of the place they are renting when buying a home becomes less of an option.
Currently in Victoria, legislation is being discussed that would give renters greater security. An example of options made available would be long-term lease agreements for landlords and tenants that can be greater than five years. These longer deals would also have the same protections as renters that have entered into shorter arrangements.
Under this new legislation, new tenants would also have the option of taking minor actions to make their rentals feel homelier. This would allow them to install fixtures, as long as they are minor non-structural alterations.
This sort of legislation is fantastic for tenants for obvious reasons. Giving them greater security for a longer period of time can really take the stress out of renting. It could be particularly beneficial to renting families or pet owners that require a better safety net.
Potential benefits exist for investors too. If a quality tenants is locked into a lease for five years, that is potentially five years of guaranteed cash flow that can be put towards your mortgage or improving your asset.
With a high-quality tenant and a long-term lease comes the benefit of no vacancy periods which will also help create stable cash flow.
There are, however, potential negatives to this sort of legislation.
Firstly, there will always be uncertainty surrounding the future. Can a person truly know what their circumstances will be in a year’s time, let alone five?
Locking a tenant in for that long period of time is a risk for not only a tenant but the investor that owns the property. They are just as vulnerable to change in their circumstances. An investor may need to move into their property, sell it or be affected by changes in the rental market and suddenly not be getting the best return on their investment.
While legislation like this has potential benefits for both tenants and investor, there may be possible negative outcomes that come with it for both demographics.
Younger generations are seemingly being hit very hard by housing affordability. Whether buying or renting, they are seeking out alternative ways to keep up and get a foot in the property door.
With that in mind, multi-generational living is a concept that more and more young people are looking to turn to.
There can be a few types of multi-generational living arrangements:
Two generations – parents and adult children ages 25 and older
Three generations – parents, adult children or grandchildren
Grandparents and grandchildren without parents
Households with more than three generations
With these types of living arrangement though, there can be benefits for both the younger and older generations.
For young people, the opportunity to stay at home presents a means to save money. Whether that is through food, paying cheap or no board; all savings made can be put towards things that will help them get into the property market or pay off existing debts without feeling a financial pinch.
This type of arrangement can occur for reasons other than saving money though. Living at home allows for the easier care of elderly parents. Grandparents can also provide monetary relief by looking after children instead of sending them to childcare.
In some cultures, multi-generational living is just a part of the norm. Considering the diverse nature of the Australian population’s heritage, it’s not unreasonable to assume this occurs.
It can be a sensible and convenient way to gain companionship that can be very appealing.
Multi-generational living does come with its negatives.
For example, when moving back in with your family there can be a lack of privacy that will take you back to your teenage years. This is particularly relevant if they are prone to snooping.
Another negative is that your presence may put an added financial strain on the household. Electricity, water and food bills tend to add up over time.
What does the future hold?
These are only a couple of the ways that some modern renters are shifting away from traditional rental practices.
While the Australian property market has begun to slow in recent times, it still remains at a level of affordability that many may struggle to reach.
This may leave renters feeling they have no other option then to reassess their ambitions to own property and instead settle for a rent-for-life attitude instead.
If current trends and performance continue at a consistent level it can be assumed that prices will continue to rise, even if it is at a slower rate than has been experienced in recent times.
No matter what the future holds, when you’re with Little Real Estate we’ll make sure all your property management needs are taken care of. For all your real estate enquiries, contact us today.