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  1. By Kate Jones

    Melburnians are taking advantage of bargain basement rents and delaying plans to buy. Economists say savvy home buyers are renting now and buying later. A flood of apartments and flats bought by investors in the recent property boom is driving rental prices down and potential home buyers are reaping the benefits.

    Charter Keck Cramer urban economist Blair Warman said wise house-hunters were not likely to re-enter the market until the next property boom in 2006. ``Prices aren't going up like they used to, so you can afford to stay out of the market,'' Mr Warman said. ``The market has shifted back towards buyers and that will last for another two years.'' Tenants are now paying less in rental costs than homeowners are charged for interest, Mr Warman added. And it's all owing to the overcrowded rental market.

    Estate Agents say rental prices across Melbourne have dived by almost 20 per cent. Elsternwick agent Ramona Albrecht said she has coaxed many landlords into reducing rents. ``I've been in real estate now for 12 years and this is the worst I've ever seen,'' Ms Albrecht said. ``We're constantly trying to keep landlords happy and trying to keep the listings.''

    Of all residential rental properties in Melbourne 4.1 per cent are empty, the Real Estate Institute of Victoria latest vacancy rates shows. In a normal rental market, vacancy rates are about 3 per cent. As the hunt for tenants becomes more competitive, prices on rental properties have been slashed by more than $1500 a year. A Herald Sun survey found that prices are dropping in rental hot spots such as St Kilda, Elwood and Carlton.

    But the CBD's apartment glut is expected to continue and rents are predicted to plunge even lower. An extra 9000 apartments will be built in the city before 2005, Charter Keck Cramer's February industry report says. Figures from the institute show that vacancy rates for the city are 5.1 per cent -- the highest in Melbourne.

    Meanwhile, property prices will swing up again between 2006 and 2010, Mr Warman predicts. ``Melbourne's median house price is expected to increase by only around 45-50 per cent during the next upswing,'' he said. ``This is considerably less than the 83 per cent increase that occurred over the period 1996-2002 when falling interest rates improved housing affordability and supported stronger price growth.''

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