A crisis for many, ‘property investment utopia’ for others

The housing crisis is only set to worsen unless drastic and immediate action is taken, but investors are presented with a chance to be part of the solution while also making solid investment returns.

Houses in outer suburban area.
The simple equation at the moment is that housing supply is well short of meeting demand, creating a housing crisis but opportunities for investors. (Image source: Shutterstock.com)

A Gold Coast roundtable on the housing crisis concluded the situation is only going to get worse unless drastic action is taken but also highlighted the opportunities for property investors.

High rental returns and capital growth returning to national property prices presented investors with what can best be described as “investment utopia” as well offering a possible solution to the rental crisis in the form of more rent stock coming to market.

The Gold Coast was chosen as the venue for the housing crisis summit as it exemplifies the issues in both the rental and the sales markets throughout the country.

Leaders in the real estate industry from around the country, leading real estate economists and Gold Coast Mayor Tom Tate all offered unique insights into the current real estate market.

The housing crisis will only get worse, and it appears to be quite some distance away before any turnaround will occur. The core reason is the simple issue of supply.

The volume of properties in the rental market nationally has been falling for several years.

In most states, the number of properties that are either tenanted or available for tenancy has dropped between 15 and 20 per cent.

Greater incentives are needed for developers to build affordable housing.

A couple of simple reasons stand out. Over recent years many investors have been presented with unsolicited offers to purchase the rental property by home buyers and the investors have thought that they were offers too good to refuse.

Perhaps foolishly, many investors thought they would capitalise on the real estate boom and sell at what seemed a once-in-a-lifetime opportunity but of course, as we now know, prices continue to rise and many now regret having sold.

But new investors are not being attracted into the marketplace.

Competing with owner occupiers has been difficult, rises in interest rates over the past year have been off-putting and talks of rent freezes and other punitive actions have made many of the typical investors - mums and dads buying an investment property - shy away from purchasing.

Governments need to encourage property investment

The rental crisis is simply an incredible shortage of properties that are owned for the purpose of providing rental accommodation to fellow Australians.

In the housing market we see the impact of people decentralising and moving from big cities to more regional areas.

The Gold Coast has been the number one example in the country of that.

The city is now seeing the return of overseas immigrants and the forecast of an additional 1.5 million immigrants over the next five years.

In the face of this heightened demand for properties it has been met, unbelievably, with a decline in construction numbers year-on-year over the past few years.

This is the classic equation of greater demand than supply.

The answer to the unfolding debacle lays squarely at the Federal Government’s feet.

Measures must be taken to encourage and stimulate greater numbers of Australians to buy an investment property to increase the rental pool.

So many of the current factors in the marketplace are having the complete opposite effect and so taxation incentives and the like will be critical.

In the buying market, greater incentives are needed for developers to build affordable housing. Again, incentives must be in place as there are next to none at present. The answer to both the rental and sales market is to quickly address supply.

Property investor utopia

The roundtable discussion organised by the Real Estate Institute of Australia has a significant number of outstanding recommendations to address this matter and researchers are now being engaged to provide modelling that can then be taken to Federal and State Governments.

By helping them understand the reality of the problem they may be able to take the right steps to start turning around the current situation, which is likely to be with us for a long time.

An immediate turnaround in the volume of rental properties would help both markets. That is the area where the greatest focus is needed because if people can’t find something to buy, they can at least find something to rent in the interim.

Taking in all the above it is no surprise that experienced investors see this as one of the greatest periods of time an investor has ever experienced.

The best returns through the significantly high and ever-increasing rental returns and continual capital growth in their property’s values equate to investor utopia.

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