Tasmanian borrowers ‘beg’ for home loans as rents sting, broker reveals

The report based its findings on the 30 per cent of income rule, whereby whenever individuals, couples, or families pay 30 per cent or more of their income on rent, they are in a situation of rental stress. The report found low-income households were at greater risk with 42 per cent experiencing rental stress.

It found a disparity between the average portion of income renters spend on housing income (20 per cent) as opposed to owners with a mortgage (15.5 per cent).

“This isn’t surprising at all,” Tasmanian broker, Emmanuel Marios, at Derwent Finance said.

Mr Marios, who services clients across the state, said the rental market had been “utterly brutal” for many years and renters were “begging for assistance to get finance to purchase their own homes” as rents become unaffordable.

“There is a lot of pressure and anxiety of finding a new home to live in … often it’s too stressful and landlords are doing little to nothing to support in these times,” Mr Marios said.

“Many are spending more than half their wages on rent to live in a sometimes-non-compliant rental, just to keep a roof over their heads.”

On the other hand, he added many established home owners are “having to sell their owner-occupied homes due to unforeseen circumstances in their financial standing” due to the rising cost of living or interest rate hikes.

“It’s rather sad seeing so many sell their dreams and start from scratch and therefore further flood the rental market, which is already in such short supply,” Mr Marios said.

Incentives on offer for Tasmanian property investors

Given the dire situation, the Tasmanian government has released an expanded Private Rentals Incentives (PRI) program, which invites property owners to make their homes available for affordable rent to eligible households on low incomes.

Under the PRI program, rents are capped at between 25–30 per cent below median rates in their region and in return, property owners receive an incentive payment of up to $9,900 per property per annum.

In addition, property owners are guaranteed rent for a two-year lease.

Mr Marios said the program would encourage investment for the “right borrowers”, that is, Australians who have a higher income yield and therefore more capacity to borrow from lenders.

“We have even seen some lenders offering owner occupied rates or very close to for investment purchases … where previously investors were slapped with higher rates to try and discourage the market from being flooded with too many,” Mr Marios said.

Given demand is strong in Tasmania and vacancy rates are low, the investment property market has been “very active” and many investors relay the ease in finding tenants, he added.

“As long as demand is there for rentals, investors will be encouraged to continue buying,” Mr Marios said.

However, investment properties have not been immune to the seven consecutive rate rises, he said.

“We are seeing a number of applicants borrowing capacities tightening, in turn seeing a slightly smaller growth rate as compared to recent periods where rates were lower,” Mr Marios said.

For families stuck in exorbitant-priced rental accommodation, government incentives such as the Family Home Guarantees and First Home Guarantees continue to be a good option for clients.

Rental affordability crunch

Indeed, it’s not just Tasmania feeling the rental blow given the extreme weather conditions this year; the RAI report also found that the floods significantly impacted the Northern Rivers of NSW, with the region facing low vacancy rates.

In addition, rental affordability across the nation’s regional areas, such as Queensland, Tasmania, and Western Australia has continued to be most affected by city residents driven to tree and sea changes.

Greater Brisbane has hit a historic low point for affordability. The city is considered moderately unaffordable for the first time, with an 11 per cent decrease in RAI score over the past year — the largest decline of any capital city.

Greater Sydney, Greater Melbourne, Greater Adelaide and the ACT improved in affordability during the COVID-19 pandemic but declined this year.

[Related: Tasmania expands housing measures]