The “greedy landlord” narrative is dangerous

A recent survey conducted by the Property Investment Professionals of Australia (PIPA) supported what we’ve been experiencing at the coalface; we have a burning issue in our nation, and the driving force is not softening.

It’s getting worse.

We have a rental crisis gripping many cities, (both regional and capital) with ultra-low vacancy rates, huge pressure on rents and a diminishing pool of rental stock. Renters are being forced out of areas, rental prices are soaring, and homelessness is a gripping reality for so many.

The rhetoric that has bounced around our nation for decades has been misguided at best. Sadly, we’ve listened to cries of “greedy landlord” without actually understanding the root cause of the issue. We’ve witnessed policies intended to enhance opportunity for first homebuyers to enter the market. Stamp duty concessions have been made available for low income earners. Regional grants have been on offer sporadically to increase purchaser uptake in various locations. Recently many states, (especially Victoria) have introduced new rental reforms that almost unilaterally favour the renter, many of which broadly disempower the rental providers.

All the while, our governments have continued to ignore the importance of rental stock.

The basic impact of lessening supply means that the demand/supply ratio has increased. With any changing ratio, the resultant impact is pressure on rental prices. Circling in on a greedy landlord is non-sensical when we consider what is actually happening at the coal face. Renters are experiencing the impact of the lack of supply from the moment they try to apply for a roof over their head. Days on market are ridiculously short, options to choose from are completely limited, queues of prospective renters at open-for-inspections are long, and they are finding that it is taking multiple application attempts to secure a rental.

What are they doing to combat this? Offering higher rents.

I can attest to this as an investor myself. The last few new tenancies I’ve experienced have been at a price higher than what I’ve set as (what I thought was) market rent. It’s not a case of being a greedy investor, jacking up the rent. My tenants have applied with a higher rental figure in a desperate attempt to beat the competition.

Our rental property count nationally has been eroding for the last decade, and for various reasons, including;

• Decreasing rental yields, (until 2020 our yields were decreasing as property value growth outstripped rental growth),
• Talk of abolishing negative gearing, (let’s face it, when they talk about tax reform, we all get jittery if we know it could impact our personal economy),
• A tough credit squeeze from 2015-2019. It was particularly difficult during this time for investors to borrow,
• Higher interest rates for investing vs owner-occupier purchasing,
• The threat of rental eviction moratoriums being enacted,
• Rental ‘freezes’ being applied,
• Rental reforms that remove or limit owner’s rights,
• Dramatic land tax changes, (such as Queensland’s recently repealed tax), and more recently
• Increasing interest rates and the threat of heightened ‘out of pocket costs’ negatively impacting the investor’s personal economy.

As cited in this savings.com.au article, “PIPA’s annual survey was conducted in August and was based off the responses of 1,618 property investors; it found that 16.7% of investors had sold at least one property over the two-year period.”

“This reflects a potential drop in rental supply of 10% – or about 269,000 dwellings – given around 65% of these were bought by owner-occupiers.”

“The findings of the survey also revealed that about 19% of investors are considering selling in the next 12 months, which Ms McDougall believes is in response to the (now repealed) Queensland land tax changes.”

“The survey provided investors with more than a dozen potential reasons why they may sell a property in the next year – and the Queensland land tax was the top reason with nearly 31% of investors,” Ms McDougall said.”

“Investors are also feeling like they have lost control of their real estate assets, because 29% are considering selling a property because of changing tenancy legislation making it too costly or hard to manage.”

“Followed by the threat of losing control of their asset because of new or potential government legislation (27.5%), and the threat of rental freezes being enforced by governments (23%).”

“If the percentage of investors who are considering selling winds up doing so, then we are going to see even higher rents as well as a sharp increase in homelessness – especially in Queensland.”

“The continual decrease of investors intentions to buy was also reflected in the survey, with only 58% believing now is a good time to invest in residential property – down from 62% in 2021 and 67% in 2020.”

“Ms McDougall said PIPA has been warning about the potential rental undersupply for five years now, but governments had repeatedly refused listen.”

“When we warned about the potential impact from lending restrictions on rental supply back in 2017, no one took any notice, and when we started highlighting the looming rental undersupply some two years ago, again, we were ignored as real estate zealots,” Ms McDougall said.”

“It is clear that investors are sick and tired of being treated appallingly by policymakers who continually believe that they are an endless supply of revenue for their coffers.”

“But when nearly 270,000 rental dwellings disappear in just two years – because governments thought private investors would forever shoulder the burden of providing rental housing while being taxed and taxed some more – well, have we got news for you.”

We do not have a government, (nor a willing taxpayer base) that can suitably accommodate every renter in social housing.

We must recognise that the provision of housing is shared by government, not-for-profits, trusts and private investors.

Food for thought.

Little will be achieved to support the plight of renters if our governments continue to dis-incentivise private residential property investment. It started as basic supply/demand ratio imbalance and it is now a crisis for many.