How Do We Solve The Rental Crisis?
In This Week's How's The Market | Edition 44
How Do We Solve The Rental Crisis?
New Homes Are Fetching Premiums
5 Properties, 1 Block In The Dandenongs
How Do We Solve The Rental Crisis
We all know that we are in a rental crisis. Though an interesting question to ask is did we see this coming?
Below is a graph that shows new loan commitments broken down between owner-occupied lending and investor lending.
You can see a steady gradual decline in investment lending since 2017 when the investor lending regulations became tighter.
In Jan of 2017, investment lending was 40% of all current lending, by May 2020, investor lending fell as low as 25% of all new lending.
Over this same period and the last 20 years, we have also seen a trend of more people being forced to rent and less being able to purchase a home due to the increased cost of real estate and dwindling wage increases.
A rental crisis has been slowly brewing since 2017 and was not caused solely by the pandemic, though the pandemic was a catalyst as more investors sold off their investment properties.
So what do we do?
Some will suggest the government needs to build more public housing and whilst this is part of the solution it will unfortunately have a small impact.
This is because government housing makes up less than 10% of all rental accommodation and the vast majority of people in the rental market would not be able to qualify for the government housing schemes.
In order to ease the burden on renters some government parties like the Greens have suggested that we create rent freezers, however, this will not work as it simply punishes the investors that are the providers of over 90% of all rental supply and will encourage more of them to sell their properties further deepening the crisis.
The only way to quickly ease the rental crisis will be to increase the supply of privately owned rental accommodation.
The government could encourage this by removing the interest rate premium that applies to investment loans (compared to home loans) and reducing the 3% interest rate serviceability buffer which will need.
In addition, new policy that facilitates more new homes to be built in order to increase overall housing supply and provide more affordable housing as an option for tenants who are looking to buy as well as rent.
What The Agents Are Saying
Newly built homes or recently renovated properties are fetching a premium.
Whilst house prices and sentiment are starting to slowly rise, one thing that is not rising is confidence in the construction industry.
As more and more builders are dropping like flys, recently completed and newly renovated properties are fetching great premiums.
Agents are telling me they are still facing stock shortages but numbers in opens, sentiment and auction clearance rates across Metro Melbourne are trending upwards.
The Wow Factor!
The ultimate home & business opportunity.
81 The Crescent, Sassafras, Vic 3787
Why buy one home when you can instead buy five!!
This property not only has a beautiful home positioned in the rainforest atop Mount Dandenong, but it also has four separate detached cottages that are designed for bed & breakfast as well as a shared yoga studio & gym.
Here lies an opportunity to not just live in a beautiful home, but also generate an income.
In The Media
Aussie single mum forced to pay $11,000 after facing 40th rental move
You have to feel sorry for some families experiencing evictions during the rental crisis.
Having a family and being forced to move homes every 12 months would be exhausting and stressful.
Final Thoughts
The rental crisis has caused a lot of stress and grief around Australia over the last 12 months.
Whilst there are signs of it slowing down, the only way to put it to an end is by increasing private rental supply. This will only happen by incentivising investors back into the market.
If monetary policies ease and property prices start going back up, many investors will see an opportunity to jump back into the marketplace.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is my opinion, please seek your own expert advice when making decisions.
