When tenants wake up on Monday morning, the COVID-19 induced moratorium on evictions and rent increases will have come to an end. March 29th marks the end of a year-long limitation on property owners to remove tenants that failed to pay rent, capped rents and effectively kept investors out of the Perth property market.
Tenants are justifiably nervous about the prospect of sharp rent increases with the state government pleading with landlords to “be reasonable” with any rent increases.
Governments have done property investors no favours in past years, actively pursuing policies that discourage investing despite asset values falling around 20 percent since 2014. The plea from government for landlords to be lenient now that the moratorium has ended seems a bit rich especially considering less than two per cent of residential tenancies in WA were affected by COVID-19 throughout the past twelve months.
Since the moratorium was introduced, the rental market has sharply tightened with supply falling to less than 3000 listings metro-wide and a vacancy rate at 0.9 percent, well below a market-balanced 3.5 percent. Rents are inevitably on the rise as a result. Upward pressure on rents is now at critical levels as investors continued to wait until they can buy in a less regulated environment. The short supply problem is exacerbated by existing investors taking advantage of more favourable market conditions and selling their properties. Investors are yet to materialise in any meaningly numbers and as a result, new supply of tenantable property will remain very low for the foreseeable future.
Trouble Ahead
Ironically, the government has been actively encouraging workers into WA who are already finding it extraordinarily difficult to find rental accommodation. On a positive note, REIA’s recent Housing Affordability Report ranks WA as the most affordable place to rent in Australia with an average 16.4 per cent of a tenant’s income going to rent.
There is no doubt that WA rents are coming off a very low base and that means there is probably room for rent increases. The problem is the increases will now be sharp and steep rather than gradually applied as an unimpeded market naturally ebbs and flows.
It was entirely reasonable to continue emergency support measures for COVID-19 impacted tenants, a position supported by REIWA and industry. It was simply baffling that the extension was applied to all tenancies from September last year. If the government had not extended the moratorium back then, rent increases would have been more moderate across a longer period.
The moratorium acted as a very effective disincentive to investors to supply the rental market with much needed stock. Now that the moratorium is gone, tenant complaints about rising rents ought to be directed to the state government who must take responsibility for causing the anticipated steep rises.
