Rental supply stagnating in New South Wales

The Real Estate Institute of NSW issued a challenge to the NSW Government this month.

Based on the reforms the Minister for Better Regulation and Fair Trading is championing, the plan to drive investment into the residential rental market in order to solve the rental crisis is clear.

It begins with taxing an investor in the form of stamp duty for the ‘privilege’ of making a property available for rent, before telling them what they can and can’t do with the property they’ve purchased.

Forcing landlords to allow their tenants to keep pets, irrespective of how unsuitable the property might be. Forcing landlords to wear the cost of repairs for the destruction those pets cause. Forcing landlords to go to court to prove the reason they want to recover possession of their property is genuine.

‘Allowing’ landlords to adjust the rent once a year, though the repayments they must make on the loan for their property may be adjusted multiple times.

The list goes on.

On behalf of the industry, landlords and tenants across the state, we want to know how this plan will address declining growth in the number of properties available for rent.

It’s especially poignant given the number of people looking for a home to rent is increasing substantially.

With natural population growth compounded by interstate and international migration, each month there are thousands of additional people coming to New South Wales looking for a home to rent.

Yet an analysis of the number of bonds held by the NSW Rental Bonds Board shows clearly that the number of properties rented in the state is stagnant.

Which leaves Government to answer a most basic human question: where will people coming into our state live?

After all, the provision of social and affordable housing is the job of Government, not private investors.

And if Government wants the help of private investors to assist in providing rental accommodation, it might reconsider its efforts to marginalise and punish those very people whose help they want.

Vacancy rates tighten

The writing has been on the wall for a long time. Each month, REINSW figures lay bare the extreme shortage of rental properties.

In July, the vacancy rate for Sydney overall fell another 0.1 per cent, to 1.6 per cent. The August figures will be released in coming weeks and will paint a similarly grim picture.

For perspective, a ‘healthy’ vacancy rate is generally defined as being about 3 per cent, typically a mark at which tenants have choice and investors have security.

Instead, we’re in the throes of a rental crisis. Without serious and considered action from all levels of government, there can be no turnaround.

So, Government is faced with another basic question: how do we attract more investment in rental property to reverse the critical rental shortage?

To begin to answer this one, it’s imperative for Government to understand who investors are and why they invest.

They don’t do it to provide a community service (remember the point about the provision of social and affordable housing being Government’s job). They do it for income and capital growth. And they can do it elsewhere – shares, fixed interest, commercial property, Airbnb, et cetera.

If residential property can’t compete as an investment, people will invest in other places. We are seeing it happen now. Government’s strategy to target investors in an apparent attempt to ‘help’ tenants has backfired.

We’ve posed a number of questions to Government. It has a lot to answer for.