Thursday, February 22, 2007

Why renters fat and thin are singing

It's a pretty safe bet the big story in housing this year will be steep increases in rents. The media have dubbed it the "rent crisis", with a leading property market forecaster, BIS Shrapnel, predicting that rents for inner-Sydney apartments will rise by more than 7 per cent a year for the next five years. But you'll hear worse than that before we're through.

Once again, politicians are going to sit by the sidelines while rents escalate. However, unlike mortgage payments, rentals go into the CPI calculation, and many employers peg wage raises to the CPI. Hence, indifferent, laissez-faire politicians will be watching national inflation spiralling out of control, and there is little interest rate rises from the Reserve Bank will do to fix it. The more interest rates go up to 'control inflation', the more new landlords who paid too much for their property will pass the costs on to tenants, and the more inflation will increase in the community. That's capitalist exploitation of property for you, egged on by the politicians...

Why renters fat and thin are singing

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