Government rental controls would ‘distort the market’

Government rental controls would ‘distort the market’

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Australia should not follow the lead of one of the world’s most famous cities and introduce a rent cap, according to a prominent property analyst.

Berlin has become the first city in Germany to impose a rent cap, but SQM Research managing director Louis Christopher said a similar scheme wouldn’t work in Australia.

“I don’t think these things can work in the long run. In terms of putting rental caps on the market, participants will simply find a way around it,” Mr Christopher told Residential Property Manager.

“The marketplace needs to be respected. It’s the most efficient way of delivering a service, and if we start putting in rental controls it’s going to distort the market.”

Mr Christopher said Australia has always had periods of fluctuating rents, and that currently there are no areas experiencing crazy rental growth.

Indeed, there are areas where rents are falling, which proves that the market works, he added.

Mr Christopher said the solution to stabilising rents is to increase the supply of rental properties.

“Bringing down the break-even cost of developing property is probably the best way of providing flexibility on the supply side,” he said.

“The amount of taxation that’s involved in property developments is crazy. It’s through the roof and it makes it very, very difficult for developers to buy and develop quickly.”

[Related: Economist pours cold water on hot housing tax idea]

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