Rental increases are the likely consequence of the ongoing investor lending crackdown, a prominent housing economist believes.
Domain Group senior economist Andrew Wilson said it was only logical investors would pass on rising mortgage costs to tenants, although it’s still early to gauge the full extent of the impact.
“We’ve only just had those rises come through, so it will take time to get a sense of whether increased rents have come from extra interest rate costs,” he hold RPM.
According to Dr Wilson, rents are more likely to increase in markets with strong competition.
“We’ve been tracking increased rents in Sydney and Melbourne recently and it’s interesting that this will only exacerbate the underlying shortage of houses for rent,” he said.
Dr Wilson said the ongoing crackdown will probably limit investor activity and make things challenging for investors and tenants, especially first-home buyers.
“If you’re making it more expensive for tenants, particularly first-home buyers, that means their wait in the queue is even longer, and then it almost becomes a symbiotic relationship between needing more investors because rents are being pushed higher through increased interest rates,” he said.
Dr Wilson said the investor lending crackdown may curb growth in the investor sector, although activity is likely to remain high.
“If we’re seeing even a general downturn, we could still see growth, although not absolute growth,” he said.
“I think we’re in for a longer period of higher activity levels in terms of market share from investors through the cycle.”
APRA, the prudential banking regulator, announced last December that it would take steps to “reinforce sound residential mortgage lending practices”.
One of the “specific areas of prudential concern” it identified was lenders that increase their investor lending by more than 10 per cent per annum.