- Poor reforms floated by politicians and market commentators could have disastrous consequences, the REINSW CEO has warned
- Investors are being driven out of the market, leading to low levels of stock already
- Renters now need to outbid one another when applying for a property
The rental crisis is spiralling out of control, with more property investors likely to exit the market as poor reforms continue to be floated by politicians and market commentators, a leading property industry leader has warned.
Real Estate Institute of New South Wales (REINSW) CEO, Tim McKibbin, has warned that such reforms are making the notion of property investing an even less attractive prospect.
“More than just short-sighted examples of electioneering, these policies are downright damaging,” he said.
“Ideas like rental freezes and no grounds evictions not only threaten to make the rental supply situation worse. They actually are making it worse.
“They are driving investors out of the market. Demand for rental property is escalating at a far greater rate than supply can keep up with.”
SQM Research data shows a sharp decline in weekly rental listings, which were steadily rising until 2020. Listings are at their lowest level since 2016, when Sydney’s population was smaller than now. The vacancy rate has plummeted, as seen below.
Sydney
Mr McKibbin noted that while it is common for buyers to compete with one another when purchasing property, this sense of competition is now apparent to those in the rental market.
“On the ground, prospective tenants in many cases are offering to pay well above the asking rent to secure a lease, knowing how narrow their options are. Obviously, agents and property managers are obliged to accept the highest offer.
Sydney
SQM Research data shows that while weekly rent prices in Sydney gradually declined just before and during the first year of the pandemic, prices have risen sharply since last year. As of this month, asking house prices are now $850 per week, with combined house and units at $670.
Pre-Covid, the peak was $750 and $626 respectively.
Landlord exodus
Mr McKibbin echoed concerns from both tenant and property investors about the lack of rental stock.
He said is ‘supply-demand 101’ and noted that properties are selling faster than investors are buying, which has been reinforced by a recent PIPA survey.
“Policies which seek to protect tenants by imposing limitations and burdens on landlords are having the demonstrable opposite effect. Tenants are the ones losing out,” he said.
“Let’s not forget that not everyone can or wants to buy a property, but everyone needs a place to live.”
“Meanwhile, the need to increase supply is gaining broader recognition from a number of influential sources. This follows the release of the REINSW rental vacancy rate figures which show the rental market, particularly in Sydney, remains at crisis point.
Tim McKibbin, REINSW CEO
“There were calls for an increase in smaller dwellings and greater housing choice in regional towns to accommodate people at different stages of life at last week’s Regional Australia Institute’s national summit,” he added.
Mr McKibbin noted that according to the REIA’s latest Housing, rental affordability declined during the June quarter, with the proportion of income to median rent now 22.9%.
“The report shows that the decline in affordability in terms of purchasing a home outpaced the decline in affordability in renting a home for the quarter. Either way, for renters who are wanting to buy, the news is grim.
“It cites the lack of supply and surging interest rates as the main culprits.
So what is next? Mr McKibbin has called for more effective reform, especially on the planning and supply side.
“At a time when the actual market is ticking along steadily, there’s a chance for Governments to put in place the policies which will improve affordability in the future. It starts with supply.
“The economic policy director at the Grattan Institute called for people to accept greater density in their suburb, to support affordability for young people and downsizers.
