Private Investor Heroes

by Hayden Groves

New federal Minister for Housing and Homelessness, Hon. Julie Collins, met with state Housing Ministers last week to discuss, amongst other things, housing affordability in Australia. The Covid-19 pandemic induced economic crisis dropped interest rates to ‘emergency’ levels and, with that, due to surging demand, came significant nation-wide gains in property values. 

As the market moved, so too did investors, many of whom made the decision to sell, cashing in their capital gains. Many of these buyers sold their investments in favour of pooling funds towards an aspirational upgrade of the family home. Others sold, consolidated their capital and moved to regional lifestyle areas, a collective ‘flight from the cities’ as working from home became a genuine alternate career choice. In some central NSW coastal areas, property values surged as much as 65 percent in two years.

In Western Australia, where property value gains have been relatively modest, long suffering property investors made their ‘cash-out and sell’ decision based upon their asset acquired in 2010 finally returning to what they had paid for it.

In some states such as Victoria, property investors sold due to the introduction of tenancy laws that removed their fundamental property rights or because of massive hikes in land taxes such as that experienced in the ACT. 

In other states, like Hobart for example, lifestyle-seeking buyers from mainland east coast cities have flocked there, snapping up homes that would otherwise be rented. Otherwise long-term rental properties have been moved into the short-stay holiday market.

The result of these trends is a massive under-supply of rental stock across Australia. Core Logic stats show national vacancy rates are at 1.2 percent, down from 2.2 percent a year ago and well below a balanced market of around 3.5 percent. Total listings of rental stock advertised for rent across Australia is down by a huge 24.1 percent compared to twelve months ago.

Over the past year, ‘for rent’ stock in Melbourne has fallen by almost a third, in Brisbane its down 28.3 percent, in Adelaide it’s dropped by 28.9 percent. Perth, where there are now 14,000 fewer tenancy bonds being held, has lost 14.9 percent in rental listings in a year. 

Unsurprisingly, rents are up nationally by 9.5 percent and will continue to rise as international borders open and the migration push for more workers to combat labour shortages kicks in. And with interest rates rising, there will be fewer first home buyers who typically rent before they buy. 

Despite these somewhat alarming figures and expected trends, governments continue on a path of disincentivising private investment in property via a regime of high taxes and punitive tenancy laws. Instead, there is much attention being paid to building more affordable social housing dwellings which represents only 3 percent of the entire housing spectrum in Australia. 

Whereas 27 percent of housing stock in Australia is owned by mostly (80 percent of them) mum and dad investors who are leaving the market in droves, a trend likely to continue unless the government starts to pay them the respect they deserve. It is private investors that are the unsung heroes of affordable housing in Australia and remain the key to unlocking supply and keeping rents affordable.