Interest rates are rising in Australia: A landlord’s dilemma and his tenant’s pain

Brisbane owner David Holt feels like he’s caught between a rock and a hard place.
breaking wave interest rate This means that when the fixed term of his interest-only mortgage ends in January, he will suddenly lose money on the modest two-bedroom home he bought in Logan, south Brisbane for $150,000 in December 2020.

When that happens, Holts says, he’ll be forced to raise the rent he charges to cover his costs, which also include condos, maintenance and repairs.

The two-bedroom villa in Logan, which David Holt bought for $150,000 in 2020. (Provided)

It’s something he says he’s done his best to avoid because he knows the impact it will have on his retired tenant.

Yvonne, who asked that her last name be withheld, is currently paying $290 a week to rent Holt’s unit in Woodridge – where she has lived for six years.

The 72-year-old told that her current rent is 57% of her earnings, which includes old age pension and housing assistance of $130 a fortnight.

Yvonne said in a recent search for nearby rental properties she found only 3 out of 50 she could “afford”, but these would also eat up more than half her income.

Anyone who spends more than 30% of their income on housing meets the definition of being in a situation of rental stress.

Yvonne was, in short, facing the barrel of homelessness, she said.

“If the landlord raises the rent in January, it will basically force me to decide which bridge I’m going to have to live under,” she said.

Yvonne, a former social worker who raised her children as a single mother, said she was barely getting by.

“It’s difficult. I certainly don’t buy luxury items in terms of food and have to use a credit card to pay for bigger items which will leave me in debt,” he said. she declared.

Yvonne said she was also very wary of planned increases in electricity prices.

“I focus on keeping a light on at night and the TV. I only use the (heater) when I’m absolutely freezing.”

Yvonne said the amount of housing assistance she received from the government had not changed in years.

David Holt said he felt great sympathy for his retired tenant, but would soon be forced to raise the rent to cope with <a class=rising interest rates.”/>
David Holt said he felt great sympathy for his retired tenant, but would soon be forced to raise the rent to cope with rising interest rates. (Provided)

“The pension is not enough to live on and it is absolutely necessary to increase the rental assistance, given the circumstances,” she said.

Holt said he only felt sympathy for Yvonne.

At 80, Holt isn’t your typical landlord.

Holt said he was living off the superannuation himself and used the equity in his mortgage-free home to take out the interest-only loan to buy the unit.

The unit, he said, was an investment he hoped to pass on to his son, who has epilepsy and cannot work full time.

“I don’t make any income from the unit at the moment, but hopefully over time the increased rental income will provide a source of income for my son.”

Holt said he found it was much easier for him to live on the superannuation, after paying for his house, than for others like Yvonne, who also had to pay rent.

“I really feel for her. She shouldn’t be paying 57% of her income in rent, that’s ridiculous,” he said.

“I care, I don’t want to see anyone roaming the streets or living in their car.

“I know she won’t find cheaper, and that’s what attracts me.

“It’s not like she’s living beyond her means in luxury. I don’t know where she could find a more affordable place.”

Holt, who is also a member of his unit complex’s corporate body committee, said he was aware of a tenant in the same building who had recently been evicted for not paying rent.

That unit was almost immediately rented out for $350 a week, he said.

Holt recently wrote a letter to Federal Treasurer Jim Chalmers, who is also his local deputy, informing him of his situation.

A spokesperson for the Treasurer responded, expressing sympathy but also warning that there were likely to be tough times ahead.

“Sorry to hear about the difficult times for your tenant and also for your family,” the spokesperson said.

“Unfortunately things will get tough before they get better, but it will get better,” the spokesperson said.

Last week, Everybody’s Home, a national campaign on the housing crisis, published figures showing that the cost of renting a two-bedroom unit in Brisbane had risen by 15% in the past 12 months to August.

The average rent for a two-bedroom unit in Brisbane is now $455 a week, down from $395 in August 2021, according to figures, drawn from three years of rental data from SQM Research.

“The plight of tenants is expected to worsen as the ripple effects of rising interest rates trickle down to tenants and combine with cost of living pressures,” said Dr Megan Nethercote, senior researcher at the Royal Melbourne Institute of Technology.

“With nearly half of tenants on housing assistance already experiencing rental stress, the risk of some tenants falling into homelessness is real and high.”

She said rising costs would likely mean some tenants would lose their homes when landlords sold the properties.

Nethercote said stronger national leadership was needed to direct the construction and operation of rental properties.

“Tenants deserve housing that is affordable, provides adequate security of tenure, is well maintained and has appropriate provisions for tenant representation,” Dr Nethercote said.

She said addressing tenants’ needs warranted “serious deliberation as part of a new national housing program”.

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