Who would want to be a Property Investor?
The last decade has been one hit after another, resulting in some unintended consequences.
Property investors have faced a barrage of poorly thought-out policies and reforms, from Government and Regulators with more to come.
You would be forgiven for thinking that governments see us as their own personal ATM.
While the intention may be to slow down the property market and raise capital, there have been disastrous consequences.
We are now facing a rental crisis the likes of which we have never seen.
At a time when population growth is fast approaching pre-pandemic levels, the appetite to invest and therefore increase the supply of housing is fast drying up.
Meanwhile, there is no solution to the housing crisis from either side of politics, only talks of further market control.
How have we gotten to this point?
Here are my thoughts…
Regulation and Reforms
Since the GFC and more recently late 2014, there has been a range of targeted measures developed, in an attempt to dampen investor appetite.
Amongst the measures from regulators include a priority for principal and interest repayments, higher interest rates, and being assessed with a 3% serviceability buffer.
Many investors faced heavy scrutiny during this time, akin to a form of forensic accounting.
This has sent borrowing capacities into freefall, resulting in a fall in demand and a reduction in the supply of properties for rent.
Governments have also had a significant role to play, particularly in more recent times.
There have been proposed changes to negative gearing and capital gains taxes that lost an election and even land tax changes that were quickly knocked on the head in Queensland.
During the pandemic, tenants did not have to fulfill their tenancy agreement and investors lost their rights as Landlords.
Although this time has now passed, there is now further legislative intervention forcing investors to question if it is all worth it.
A Pandemic
With very little to do during the COVID years, many Aussies decided to buy or upgrade their home.
At the same time, many investors chose to cash in after a period of sharp price growth by selling their investment properties.
Data highlights that over this time, 35% of those properties were being purchased by Homeowners and were not returning to the rental pool.
A gradual slowdown in housing starts due to less demand and higher construction costs has also exacerbated the rental crisis.
A fast-growing trend to short-term rentals like Airbnb has reduced the supply of properties available in the long-term rental market as well.
While the supply side has declined sharply, the demand side has been the polar opposite.
Pouring fuel on the fire is the explosion in population growth post-COVID as our borders reopen.
There are more people looking to rent at this moment in time than there are properties available.
These factors have seen competition for rental properties increase and sent rents skyrocketing.
Balance
There seems to be a lot of one-way traffic against investors at the moment and it may be time for a level of perspective to enter the debate.
On the surface, there is no doubt that tenants are having a difficult time with things.
Having difficulty in finding a place to live and skyrocketing rents is no doubt a stressful situation, with rents climbing up to $300 per month on average.
Far from ideal, in a time with additional cost of living pressures piling up.
But let’s add some balance to the argument as investors face these same living pressures.
An average investor's mortgage of around $500,000 has increased by $800 per month.
This should put talk of the next thought bubble – caps of rental increases, to bed as it will dampen investor sentiment further.
There is no doubt in my mind that a high majority of investors want to do the right thing for their tenants.
They may also like a cap on interest rates or cost of living pressures.
Balance must be the objective, or the rental crisis will remain.
Summary
In conclusion, there has been a wave of measures introduced to slow the housing market that has resulted in fuelling the rental crisis.
These measures have resulted in less supply of housing for tenants at a time demand is skyrocketing.
There is a need for a more balanced approach and less red tape for private investors providing a valuable service.
Private landlords make up the majority of landlords in our rental markets, with public housing playing a very small role.
Governments will have to find solutions to play a bigger role, to take up more of the slack if they are going to keep private investors in their crosshairs.
They may feel they are winning the battle by raising much-needed revenue, but they are losing the war as the crisis deepens.
