NSW property investment hurdles undermine lure of lower rates
Even with rental properties moving further out of reach every month, the obstacles placed in front of New South Wales property investors are such that more are selling than buying.
The significant impact of interest rate movements has been reinforced.
The return to price growth both nationally, as well as in New South Wales, can be attributed to February’s rate cut. CoreLogic numbers show the shift was moderate but then again, so were the declines in recent months.
Internationally, it’s a case of wait-and-see as to how Trump’s tariffs might impact the market. The Australian dollar and share market have nosedived, however, property is considered far more stable. But will real estate prove to be exempt? Time will tell.
The decision by the Reserve Bank to leave rates on hold was largely expected and the door remains open to further cuts this year, perhaps as soon as next month. Certainly, the Government will be hoping the economic discussion skews in this direction leading up to the election.
Of course, we can’t talk about price growth without affordability. CoreLogic’s Hedonic Home Value Index shows that in March, the national rental index increased a further 0.6 per cent, with Sydney rents slightly increasing again. Rental growth may be slowing but rents are still trending upwards.
Rental reforms about to kick in
There are instances, according to agents, of people spending more on rent than those servicing a mortgage spend on repayments.
A widening divide between those who have purchased property and those who want to but can’t has long-term social implications.
Some people want to rent and some people need to rent. They all deserve the opportunity to do so. It’s not an investor’s job to make these opportunities available though, and the more investors who choose to sell, the more these opportunities erode.
Some people rent with the goal of buying and again, they deserve this opportunity, but the options to achieve this are slim given rents are expected to continue to remain high.
In lieu of a reconsideration of damaging rental reforms, a major injection of new housing supply is the crucial circuit breaker to arrest this worrying trend. While there has been a groundswell of activity on the supply front in a planning sense, there’s yet to be much in the way of construction activity on the physical ground.
Some councils who opposed the NSW Government’s Transit Oriented Development Program have come back with alternate proposals (see: Ku-ring-gai in northern Sydney) which might feel like progress, but which essentially equates to more planning.
Slow planning processes contributed to the mess we’re in. The NSW Government’s priority must be the delivery of new supply. But it appears more pre-occupied with self-congratulation over its much-hyped tenancy reforms.
The start date for the reforms is 19 May. The date investors lose the choice to refuse a pet in their property, and the date they lose the right to recover possession of their property when they choose.
The counterproductive impacts of these reforms have already been felt, as REINSW agents consistently report that investors are net sellers in the market, week-on-week. This is having a clear impact on extremely tight rental vacancy rates.
REINSW has launched a campaign enabling investors to share their views and experiences in an attempt to prevent these state reforms from becoming replicated in some form at a federal level. If you’re an investor, there is the opportunity to have your say.
For investors willing to tolerate the erosion of their rights and the coming headaches associated with the tenancy reforms, there is still the potential to achieve solid returns and capital growth. The prospect of another rate cut this year, be it next month or later, will also be welcome.
For others, though, the decision to sell increasingly emerges as the path of least resistance.
