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A decade of “knee-jerk policies in the property investment space” have been blamed as the culprit behind the current rental squeeze.
Speaking at a Property Investment Professionals of Australia (PIPA) breakfast seminar last week, panellists spoke to the issue of critical rental undersupply and how Australia got to this point.
According to PIPA chair Nicola McDougall, the current situation stems back to late 2014.
“We have seen investor-targeted APRA lending restrictions come and go; negative gearing and capital gains tax laws continually on the chopping block; emergency tenancy laws enacted during the pandemic; and mooted rental caps now being the latest attack on investors.”
“Given property investment should be a long-term strategy, no wonder hundreds of thousands of investors are offloading their properties in reaction to the head-spinning array of financial and legislative imposts that are forever levelled at them.”
CoreLogic Asia-Pacific executive research director Tim Lawless acknowledges there’s “no quick fix” to the current crisis, despite there being new supply and increased investor activity on the way. “Once there’s some stability in the market, we are likely to see more investment; however, governments should also have a bigger stake in rental home ownership.”
“If you look at dwelling approvals historically, back in the ’70s and ’80s, governments were building about 10 per cent to 15 per cent of housing stock,” he raised.
Over the past 15 or 20 years, that figure has been much lower, consistently around 2 per cent to 3 per cent.
From his point of view, governments have “passed the chalice of rental housing responsibility to the private sector.”
“And now they’re trying to regulate the private sector — I think unfairly.”
“The biggest thing they can do is to take a bigger stake of home ownership — which could be in the form of social and community housing — but there’s no immediacy in delivering that to the market when it’s so severely needed at the moment,” Mr Lawless raised.
Antonia Mercorella, the Real Estate Institute of Queensland CEO, shared her own thoughts on the matter at hand, acknowledging that “we are worlds away from a healthy market.”
She too thinks it’s a government issue at heart, stating that “governments must accept responsibility for the position we find ourselves in here in Queensland.”
“There are around 640,000 residential tenancies and the vast majority of these are being provided by private investors, who do the heavy lifting when it comes to housing Queenslanders,” she stressed.
“The more you legislate, the more you’re just going to drive people away from permanent rental markets and either into short-term letting or into selling.”
She notes that investors are already “becoming increasingly frustrated with legislative intervention.”
“[It] effectively handcuffs them and limits what they can and can’t do in a way that we don’t necessarily see in any other asset class,” she shared.
“You only have to look at the number of properties that have been transferred from the long-term permanent rental market into short-term letting, as well as the volume that have been sold, to see their frustration in action.”
In fact, the number of investors active in the market had fallen to the lowest level since August 2020, according to the latest ABS Lending Indicators, as raised by Ms McDougall.
She has explained how “higher interest rates, as well as the three percentage point servicing buffer, is preventing many investors from transacting.”
The effect of that is reducing the supply of rental properties even further.
“The last time the number of investor loans was this low was in the early months of the pandemic when most of us were in lockdown and everyone was fearful of what lay ahead.
“That is an extraordinary comparison to make and situation to be in again,” she opined.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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