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Restricting landlords will make a bad situation worse, says expert

06 December 2018 Tim Neary
House for rent

While some renters are claiming they have been pushed out of their homes by greedy landlords, one expert has said that placing restrictions on landlords and limiting their capacity to increase rents will only make a bad situation worse.

Ripehouse Advisory CEO Jacob Field said that the problem lies elsewhere.

“The reason why rents are increasing beyond the reach of many tenants is due to a current severe shortage in rental stock.

“Landlords provide a critical component to a healthy property market through much-needed accommodation and a stepping stone for those who are potentially transitioning into home ownership,” Mr Field said.

Recently, however, investors have been prevented from purchasing investment properties because they simply can’t get finance.

Mr Field believes APRA has gone too far and banks are extremely conservative after the royal commission. As a consequence, investors have been kept out of the market.

“The underlying reason why landlords are increasing their rents is in a bid to meet current lending specifications,” the CEO said.

“Not only are banks increasing LVR requirements, but they are also are forcing minimum serviceability (minimum yields) for new property purchases and refinances.”

Mr Field said that banks are continuing to change the goal posts for investors.

“What’s more, the banks then included an additional serviceability requirement, insisting that the investment have a minimum of 4.8 per cent yield.”

Mr Field said that if it wasn’t for this pressure coming from financial institutions, landlords might not be so aggressive in pushing their rents up.

“In the first instance, banks are forcing investors to purchase high-yielding properties, and then when they are looking to refinance, there is pressure on them to continue pushing up their rents to achieve these minimum yields,” the CEO said.

Mr Field also said that additional stress is being placed on the rental market, pushing it to crisis point by the tenants themselves.

“Tenants are putting upward pressure on rent because of the severe shortage of properties available.”

He said that there are currently fewer than 100 properties available for rent in the entire capital city of Hobart.

“In these markets, there are so many renters falling over themselves to lease the few properties available; the balance of supply and demand is critically out of whack,” Mr Field said.

Restricting landlords will make a bad situation worse, says expert
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