Property still a safe bet for investors 

According to McKibbin, Australia’s real estate has a reputation for steady growth and resilience, making it a compelling choice for investors, particularly in comparison to the volatility observed in global share markets.

He described property as a “brick-and-mortar” fallback and a tangible asset that continues to produce confidence in investors during times of geopolitical and economic upheaval.

“Property is a long-term investment, and that’s why people do it,” McKibbin said.

“I think it is one of those things that attracts investment because of the security that comes with it.”

McKibbin said that over the last decade, property values have consistently trended upward, even during challenging periods such as the global financial crisis.

“In every 10 years, property values have gone up,” McKibbin said.

“Sometimes it hasn’t gone up much, sometimes it’s gone up a lot, and I think investors do get a lot of comfort from that.”

As various global markets experience significant instability, McKibbin said it will be interesting to observe whether more capital flows into property, even as a temporary safe-holding option.

While real estate is traditionally a slower-moving, stable asset, he said that current global pressures – including US tariffs and broader economic unease – could still introduce some uncertainty into the market’s future stability.

“We might see money coming into the property market, even if it’s just people parking it there short term, because of uncertainty from what’s happening in America,” he said.

McKibbin said that while properties have been a reliable asset, it remains to be seen whether these global pressures will drive a more significant shift of capital into the Australian real estate market.

Supply pressure, rental growth – a landlord’s market

According to McKibbin, investors seeking strong rental returns are also buoyed by ongoing supply constraints in NSW’s rental market.

He painted a stark picture of imbalance: approximately 610 new rental properties are being added each month, while more than 15,000 new residents enter NSW monthly.

“The state’s population has grown by 291,000 in the last 19 months, but there are only 11,500 extra rental properties,” McKibbin said.

He said that the imbalance has driven vacancy rates to historic lows of just 1 to 1.5 per cent, a statistic that reinforces just how tight the market has become.

According to SQM Research, Australia’s national residential rental vacancy rate is also experiencing minor fluctuations, ranging from 1.2 per cent to 1.4 per cent in the latter half of 2024 and early 2025.

McKibbin noted that the ongoing supply-demand imbalance is driving up rents and accelerating property turnover, creating ideal conditions for rental yield growth.

Government policy and investor sentiment

Despite positive market dynamics, McKibbin warned that recent government decisions are putting additional pressure on investors, with potential long-term consequences for the rental market.

He pointed out that new legislation, such as mandatory pet acceptance and stricter restrictions on property repossession, could discourage investment in the rental market.

“They’re changing rules to say that you can’t say no to pets, that it’s harder to take the property back, and people are worried that it’s going to make investors leave the market,” he said.

Mandatory pet acceptance, set to take effect on 19 May 2025, will significantly limit landlords’ ability to refuse pets, allowing tenants to keep up to four animals under strict conditions.

Landlords will only be able to reject pet applications based on specific criteria, such as inadequate fencing or a proven history of damage, and must respond within 21 days; otherwise, they will be required to seek automatic approval.

McKibbin criticised the changes, warning that they impose costly and impractical obligations on landlords, while leaving too much room for subjective interpretation around what is “reasonable”.

“The reforms require landlords to provide an environment commensurate with the animal’s requirements. Zoos have the same responsibility,” McKibbin said.

“For many landlords, this will equate to spending significant amounts of money to meet this responsibility.”

He added that the vague standards could fuel a surge in costly legal battles, particularly given the current under-resourcing of rental tribunals, such as the NSW Civil and Administrative Tribunal.

“It appears the parties to any dispute will need a subject matter expert to assist with what is reasonable,” he said. “We can look forward to a lot of expensive disputes.”

Without clear and timely resolution pathways, McKibbin said more investors may choose to leave the market, further tightening already critical rental supply.

“Telling an investor they must grin and bear it if a tenant wants to keep four pets is telling them to invest their money elsewhere,” he said.

“There’s a growing narrative that landlords are endless resources,” McKibbin said, stressing the need to balance tenant rights with the security that investors need to continue supplying rental housing.

According to McKibbin, investors are the backbone of the rental market and warned that if they continue to exit, the shortage of rental properties will only deepen.

“Before there’s a tenant, there’s a landlord, and before that, there’s an investor – and that person can put their money somewhere else,” McKibbin said.

Beyond rental regulations, McKibbin identified excessive government taxes and planning delays as significant barriers to increasing the housing supply.

He noted that approximately 40 per cent of the cost of a new home is absorbed by taxes and charges, a burden that stifles development and dissuades investors.

Without significant change, McKibbin warned, the private sector will struggle to meet Australia’s rapidly growing housing needs.

“We need a heck of a lot more property,” McKibbin said, calling for urgent reform to reduce red tape, streamline planning approvals, and create a more investor-friendly environment.