Lack of properties, rates anxiety stifling real estate sector

The stark shortage of rental accommodation is having a major impact.

That was the recurring theme that echoed throughout the REINSW regional tour.

REINSW spent the last few months visiting key metropolitan and regional markets around the state for its annual Roadshow tour. 

Members continue to emphasise the lack of options for renters. Many tenants are staying put in properties that don’t satisfy their needs, out of fear they will not be able to secure another. Vacancies are really tight.

Of course, this is not news to investors. But all’s not what it seems. A prolonged environment of tight rental vacancies should, at face value, be music to investors’ ears. However, rental stock is exiting the market as investors sell up.

Some sold last year, taking advantage of the booming prices at the time. Others are doing so now, cognisant of the uplift they experienced during the boom and conscious that being a landlord is increasingly burdensome.

Meanwhile, demand is increasing. There’s a theory that suggests that for every first home buyer who purchases an ex-rental property, the strain on the rental market is proportionally eased. This is clearly a naïve and simplistic view. Borders opening, students returning and population growth equals more renters.

So the supply-demand imbalance remains the most pressing issue facing the market. The answer is not a simple one but more supply is the simplest starting point.

Confidence through certainty

The interest rate rises in recent months are having the anticipated impact. The real estate market had already been cooling and now there’s evidence of a broader slowdown in spending.

There’s general acceptance that the Reserve Bank has to act to counter rising inflation. But maybe there’s a way to do it without impacting confidence too significantly. As it stands, we’re all holding our breath each month to see how much rates will go up by. It fuels the uncertainty that’s eroding confidence.

Consumers crave confidence. This goes for all purchases but is especially true for purchases as significant as property.

We believe there’s an opportunity for a more transparent and upfront discourse in this area. We all know rates need to increase. But confidence comes through certainty, and real estate – and all industries for that matter – would benefit from a defined outlook, instead of an anxious wait each month.

Regulatory change at last

The news that the NSW Government will establish an independent statutory Property Services Commissioner within the remit of the NSW Small Business Commission is cause for optimism.

Currently ineffectively regulated by NSW Fair Trading, the property services industry needs specialist and dedicated regulatory oversight. The industry itself is a huge revenue contributor to Government and a property purchase, for most people, will be the largest financial transaction they’ll make in their life.

This reform represents an important shift not only because this weight of money needs dedicated attention. It also represents an opportunity for Government and industry to work together on the industry’s most pressing issue: affordability.

The adversarial approach taken by NSW Fair Trading towards the industry made collaboration impossible.

Consumers have the reasonable expectation that both Government and industry will work together and deploy their respective resources for consumer protection, in what is the largest transaction most will ever make.

There’s a lot of work to be done to address housing affordability and the crucial issue of housing supply. Rising to this challenge will require the combined focus of government and industry.

REINSW is committed to building a mutually respectful and collaborative relationship with the Office of the Small Business Commissioner. It’s important we take this opportunity to forge an environment in which Government and industry works together cooperatively and constructively, with shared goals and a common agenda, in recognition of the magnitude of the task that lies ahead.

Everything starts and finishes with the best outcomes for the consumer.