http://www.news.com.au/business/money/story/0,28323,25288311-14327,00.html

AUSTRALIA is facing a homeless crisis with more than 200,000 tenants in rented accommodation forecast to face eviction by next year – 80,000 in NSW alone.

Research conducted for The Sunday Telegraph by Fujitsu Consulting shows that as many as 183,000 rental households across Australia could be in arrears by December, assuming unemployment rises to 7.5 per cent, with 68,000 in NSW.

But if unemployment rises to nine per cent next year, as many economists predict, the number of tenants facing eviction rises to 216,000 nationally, and 79,000 in NSW.

The actual figures may turn out to be significantly higher because research could only take into account those landlords with mortgages. It is not known how many more landlords there are who own their investment properties outright.

The rise in unemployment will lead to a flood of claims to Centrelink for rent assistance, but the state benefits are often not enough to meet the rent payments in full, leaving landlords with little choice but to evict the occupants.

Tenants are deemed to be in breach of contracts if they fall two weeks behind with rent. With many of Australia's 1.9 million landlords needing the rent to cover mortgage payments, few give the tenants much extra time to pay arrears and tenants can find themselves on the streets within weeks.

"Our research shows that landlords are being hit hard by the falling stock market and low returns on savings," said Martin North, executive general manager of Fujitsu Consulting.

"Therefore they need the rent to come in to cover their mortgage payments. If the rent stops, they need to act quickly, otherwise they fall behind with mortgage payments."

Shane Oliver, chief economist at AMP, says the findings represent a "social problem" and will get much worse before it gets better.

"In this tight rental market, landlords know they can get new tenants quickly, so they won't put up with tenants in arrears.

"Also, rents have been rising because demand for accommodation is so great. And that is placing more pressure on tenants."

Mr North says that Fujitsu's economic modelling shows that in economic downturns, unemployment tends to rise fastest among people who rent their homes.

"As unemployment rises, it is likely that the supply/demand situation in Australia will reverse, so there will be more properties than buyers – a classic sign of a property bubble," Mr North said.

Some ideas follow. Some could be prolonged but some are impossible to avoid in the short term. I will note those with an *

1 – FHOG boost gets taken away.
2 – Unemployment keeps increasing. *
3 – Immigration keeps decreasing. *
4 – Stock increases as BB leave work and sell both PPOR and investment property. *
5 – Negative gearing is reassessd.
6 – Bank lending criterior is tightened further. *

As for the 500k replacement cost, that can easilly decrease.

1 – Land is in a bubble because state govt and developers have been maximizing revenue but soon they will realise that 10 sales @ 250K is worth more than 2 @ 500K.
2 – Commodoties have already dropped so building materials will end up costing less.
3 – Overpaid tradies will become increasingly desperate as construction decreases and work for less.
4 – REAs will start talking vendors down in bids to stay employed.

It's all tightly connected Harb. Already, near me, 4 bedddys on reasonable blocks are getting close to what I would consider worth buying. And they are only 40K more than a tiny townhouse is worth??? Yeah right. The buyers that have been supporting the market these past few months have little to no deposits and have had finite amounts extended to them as a mortgage. Poor buggers have been sucked in by some pretty evil federal policy. That is the only real floor at the moment.