Hitting investors is no way to solve the rent crisis riddle
In his regular column exclusive to API Magazine, Tim McKibbin, CEO, REINSW, makes an impassioned plea for governments to refrain from impeding the investors contributing to the ever-shrinking pool of rental properties, while arguing it's also an opportune time for investors to enter the market.
The focus on the rental crisis has intensified.
The REINSW has repeatedly made the point that when policies and politicians threaten reforms that add to the burdens faced by landlords, they make investing in property less attractive.
And tenants lose out. We acknowledge this is a tricky point to make when media headlines can more easily – albeit falsely - attribute renters’ plight to landlords’ greed, irrespective of the real-life scenario.
Those looking for proof need only consider the rate at which investors are selling their properties as the weight of potential reform and negative sentiment pulls against them.
A home is not a discretionary desire. It’s something we all need and deserve. This is an accepted view.
Peoples’ right to own property should be as equally accepted. Investors buy property for various reasons but financial security and for income on which to live are, for many, at the top of the list. They do not invest to provide a community service. Governments collect tax for this purpose.
This all sounds self-evident but when politicians seek to introduce ideas like rent freezes, at a time when investors’ repayments are increasing, they are seeking to impose upon them to provide a housing service to the community - to do government’s job.
The threat of such impositions is compounded by various obstacles investors face in the current market, such as rising interest rates, economic uncertainty and a simple lack of choice. But there’s always another side to consider.
Investor value
Perhaps it’s time to remind ourselves why an investment in residential property can still make sense for a lot of investors. Right now, various factors remain in investors’ favour.
Obviously rental demand is strong. Immigration is gathering momentum and the increased government cap on numbers will see it continue to do so. Population growth is one of the main contributors to housing market resilience.
For those looking to buy, there’s value on offer. City, state and nationwide figures show prices are falling, though individual suburban markets have always marched to the beat of their own drum. Nevertheless, there’s no need for investors to pay a premium at present, which is important given repayment calculations will need to factor in higher rates.
Prices are set by buyers in competition, and at the moment more investors are exiting the market than are entering.
Investors looking to buy may experience reduced competition for investment-grade properties as a result. Obviously, it all comes down to individual circumstances, but current conditions might see the planets align for some investors.
They will be entering a market in need of a health kick.
A healthy rental market means choice for tenants. This means some vacancy is necessary. At the moment, many tenants are settling for – or staying put in - rental properties not suited to their needs because they have nowhere else to go.
A healthy rental market also means security of returns for investors. It’s a market in which people want to invest and to be a part of.
Finally, it means demand for rental accommodation is satisfied by supply and on this basis, the current market can only be described as decidedly unhealthy.
