A survey by ME Bank has found that over two-thirds (68 per cent) of renters reported rent stress, which is typically considered to be rental payments of more than 30 per cent of household disposable income.
Fewer respondents reported mortgage stress, with 42 per cent of mortgagees paying more than 30 per cent of their household disposable incomes on mortgage repayments.
The survey of 1,500 households in June 2021 (with assistance from DBM Consultants and Economics & Beyond) found that on average, renters are spending 41 per cent of their income on rent.
This has jumped by 8 per cent over the last six months to June 2021.
The current level of rent stress is 3 per cent higher than that measured in December 2019 before the coronavirus pandemic.
The proportion of renters reporting no stress reduced from 40 per cent in December 2020 to 32 per cent in June 2021. Those reporting some stress increased from 21 per cent to 25 per cent, those reporting moderate stress increased from 26 per cent to 29 per cent, and those reporting a lot of stress increased from 12 per cent to 15 per cent.
Groups that reported higher levels of rent stress include single parents, couples with young children, retirees, and households on low incomes (less than $40,000 per annum) and below average incomes ($40,000 to $75,000 per annum).
Furthermore, more women (75 per cent) reported rent stress than men (60 per cent).
Commenting on the survey findings, ME Bank’s consulting economist, Jeff Oughton, said that a range of factors has contained mortgage stress more than rent stress, including low interest rates, a recovery in economic activity, and loan repayment deferrals by some households.
“Furthermore, households are well ahead of their minimum repayments and have significant net equity or savings in their home loans,” Mr Oughton said.
On the other hand, rental markets have significantly tightened across most of the country, while falling vacancies have resulted in steep rent rises, he said.
As at June 2021, the median rent of houses and units had jumped by 6.6 per cent compared with the same time last year to $476 per week, according to CoreLogic data.
“Renters are now facing some of the biggest rent hikes we’ve seen since the global financial crisis,” Mr Oughton said.
“While wage gains, on average, have picked up slightly from the historical lows recorded at the onset of the pandemic, government income support has gradually unwound, and rental moratoriums have ended.
“We may see more renters facing hardship as lockdowns continue, particularly among low-income, low-saving households reliant on government support.”
ME Bank’s findings have followed the recent release of a report by CoreLogic, which said that servicing mortgages have become cheaper than paying rent on 36.2 per cent of properties, which is higher than the pre-COVID-19 proportion of 33.9 per cent reported in February last year.
[Related: Mortgage stress declined in May: Roy Morgan]
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.