by Hayden Groves
Across the nation, rental vacancy rates are sitting at around 1.1 percent and continue to trend downwards. There is a dramatic shortage of housing supply and demand for homes is strong, fuelling rent rises in Australian cities and regional areas.
The rise in popularity of short-stay accommodation houses has taken up normally long-term rental stock, investors have been ‘profit taking’, selling up as home values rapidly grew then peaked in big east-coast cities and population growth continues to fuel underlying demand.
In some jurisdictions, land tax hikes, changes to residential tenancy laws and the introduction of foreign investor taxes have discouraged property investors. Across Australia’s entire housing supply, 27 percent is delivered by privately owned rental properties, 80 percent of which is owned by mum and dad types who own one or two properties.
A rent freeze would see investors flee the market
Over the past ten years, investors have been buying property, with increases in rental stock across all capital cities. It’s just that they haven’t bought enough to meet demand. The National Housing Finance and Investment Corporation estimates we’ll be 160,000 homes short by 2030 unless we increase supply. Since 2018, (coinciding with the threat of changes to negative gearing) the gap between the number of investors selling versus those buying has widened.
Meanwhile, the Australian Greens’ proposed solution to impose a rent freeze over the next two years, is a reminder that some of our political leaders have little idea as to how private property markets work. A rent freeze, whilst well-intentioned, would see investors flee the market, leaving stock levels so dramatically short, rents would rise to unsustainable levels leaving many thousands of people with literally nowhere to live.
Instead, how about providing incentives for investors to provide the housing stock? Stamp duty concessions if you bought in areas particularly short of housing supply, tax concessions if providing housing for key workers like teachers and nurses in the regions, rebates for investors renting to vulnerable citizens are just some ideas to encourage more private sector investment.
For tenants, it is a difficult time. Whilst it hasn’t always been that way (in January 2018, there were about 12,000 rentals advertised on reiwa.com, now there is about 1,900) there is little evidence to suggest the current supply shortage will ease anytime soon. Rents will continue to rise and tenants will normally have to compete to secure a property. If you are looking to rent, make sure you have your references in order, are prepared to meet the market demand and make quick decisions. Those hesitating to sign a lease after being accepted in the hope something better might come along, may find themselves waiting to find a home for longer than expected.
