By Pete Wargent September 1, 2018

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A Rental Crisis Looms making Labor’s proposed changes insane

Property Investment
A Rental Crisis Looms making Labor’s proposed changes insane

Some months ago I wrote about the prospect of a 'rental crisis' being the next big housing market story (even leading some readers to question my mental health - isn't social media the best?).

Of course, these trends play out over a period of years rather than in tune with today's 24-hours news cycle.

And just as I was lambasted for flagging overbuilding of units in some pockets in 2013 I don't expect much support this time around either. Housedowncrack

Despite record dwelling construction through this cycle, rental vacancies have actually fallen over the past year, with only Sydney holding the numbers up as record supply comes online (a huge number of investors bought off the plan in this cycle).

In some markets such as Hobart and a number of regional towns rental vacancies have sunk as close to zero as you'll ever see (there'll always be some frictional vacancies) - and Canberra is heading in that direction - but these episodes may be explained by local factors.

The acid test will be what plays out in Victoria.

And the signs aren't looking good for renters, with the latest REIV figures showing the state's vacancy rate plunging to the lowest level on record.

Abc

Source: ABC News/REIV

As Melbourne accelerates towards full employment on the back of a record construction boom, the state is attracting migrants from all over Australia as well as overseas.

The city added more than 125,000 residents over the past year, and will exceed 5 million later today.

This year the city will likely add at least as many residents again.

In the normal course of events the rental market would respond accordingly.

But in this instance Labor is proposing making prospective investment unattractive altogether by quashing negative gearing, which will greatly diminish the availability of affordable rental housing.

Insane.

About Pete Wargent Pete is a Chartered Accountant, Chartered Secretary and has a Financial Planning Diploma. Using a long term approach to building businesses, investing in equities, & owning a portfolio he achieved financial independence at the age of 33. Visit his blog

9 comments

Sam 2018-09-09 19:50:26

Aren't many of the renters, renting because of the unaffordability of the currant house prices? And wasn't it conditions favoured investors that investors flocked in and out bid owner occupiers? I understand this forum is likely to have 'investor bia ...Read full version

0 replies

Alex 2018-09-01 10:29:35

1 reply

Todd 2018-08-31 11:22:03

So true Pete. Here in Canberra where i live the disincentives to investors (huge land tax and rate hikes) has seen rents skyrocket and the vacancy rate consistently under 1%. More and more investors and selling out of Canberra due to the holding cost ...Read full version

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Sam September 9, 2018

Aren’t many of the renters, renting because of the unaffordability of the currant house prices? And wasn’t it conditions favoured investors that investors flocked in and out bid owner occupiers? I understand this forum is likely to have ‘investor bias’ but is it all about money? Having previously lived in other developed countries I can only agree that tenancy law needs to be fairer. Whether renting or owner occupier having a house to live is a basic need. It not all about money… may be for some. I can understand if policy maker want to encourage more would be owner occupies to have the one house they want to own rather than investors to have ten.

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Alex September 1, 2018

The Labor government wants to encourage home ownership in the ACT by increasing low cost housing supply and limiting R/E prices while making money on the way. The supply is meant to be increased at a cost of investors who are forced to sell off cheap because of increasing land tax, interest rate increases and tightening tenancy laws. Victoria follows the ACT footsteps. My first reaction was dismay, but now I am quite interested to watch how this policy pans out. It’s like discouraging smoking through increasing tax while expecting more tobacco supplied to the market.

2 replies Reply

Michael Yardney September 1, 2018

well said Alex – some intersting times ahead

1 reply Reply

Alex September 1, 2018

One liberal treasurer not so long ago advised first home buyers “to get a good job that pays good money” with the Labour opposition labelling these comments as an insult. Today ACT Labors add injury to the insult – those who fail following such “advice” in Canberra will be taxed more via exuberant Land Tax by the ACT Labour government.

0 replies Reply

Todd August 31, 2018

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John Thomson August 31, 2018

I don’t agree having worked in both the private rental sector as well as the Ministry of housing.
Negative gearing should only apply to “NEW” builds and not existing premises. Allowing it to be used on existing housing doesn’t help anyone as it just forces prices up and squeezes out first home buyers

1 reply Reply

Michael Yardney August 31, 2018

John – if you don’t think negative gearing should be allowed for established properties, why should it be allowed for new builds?

0 replies Reply

Chris August 31, 2018

Yep .. finally someone thinking ahead in years. Remember the impact of decisions being taken by property investors today will not be seen for at least 12 months and probably 2-3 years or more. I have recently sold two properties – the new buyers were NOT investors.
The changes in last years budget (depreciation and travel allowances), plus higher borrowing costs for non-owner occupier and now new tenant regulations in Vic will make it even harder than ever to make any money from providing housing for other people.
Good luck finding new investors if the tax LOSS claim also disappears.

A Rental Crisis Looms making Labor’s proposed changes insane

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