The Rental Crisis, Where Are We Now? May 2007 RETURN
We have previously commented the inner city is experiencing vacancies nearing less than 1% of total supply. Whilst this has investors relishing their significantly higher income returns, rising values & choice of tenant, would be renters have a near impossible task to secure quality premises at sound market levels. It is now common place for them to endure competing applications, rental bid offs, offers $50 to $100p.w. over the asking rent and still fail to secure rental lodgings. It is tough out there!
The most significant reason for this is the lack of new residential construction in the past 3 years. As the 10% GST paid on new residential property cannot be claimed back by the developer, returns dwindled to the point where new projects did not have enough profit incentive to proceed, hence the current shortage.
Victorian starts in medium density units is 21% off the peak. Australia wide, the December quarter had the lowest housing starts since 2001. From a dramatic low, NSW showed the only seasonally adjusted improvement. According to ANZ economists, the underlying demand is 175,000 per quarter and the December period only provided 151,000.
Economic forecasters BIS Schrapnel predict apartment rents to rise 42% by 2011 and first home affordability is also at the worst on record, so buying is not an alternative for many.
Where to go from here? Increased rental returns and price growth will probably lead to enough investors returning to the market to stimulate the market for the extremely vital “off the plan sales”. Construction will then follow.
The State Budget importantly announced investor incentives with a higher minimum land tax threshold for investors. Now no tax will be paid for properties up to $225,000, assisting 28,000 owners. The top rate is reduced from 3% to 2.5%, a saving of $125m or $508m over 4 years. It also had a $510m programme to supply 2350 affordable homes for low income families in the coming years. The government initiatives are welcome yet stamp duty relief would have assisted affordability to occupiers who would no longer have to rent and to the investor who would increase supply.
The reduced taxes and correcting market forces will not have immediate impact yet will commence a slow return to more balanced conditions. In the mean time the investor will have a jolly old good time, yet at the expense of the renting public.
We have previously commented the inner city is experiencing vacancies nearing less than 1% of total supply. Whilst this has investors relishing their significantly higher income returns, rising values & choice of tenant, would be renters have a near impossible task to secure quality premises at sound market levels. It is now common place for them to endure competing applications, rental bid offs, offers $50 to $100p.w. over the asking rent and still fail to secure rental lodgings. It is tough out there!
The most significant reason for this is the lack of new residential construction in the past 3 years. As the 10% GST paid on new residential property cannot be claimed back by the developer, returns dwindled to the point where new projects did not have enough profit incentive to proceed, hence the current shortage.
Victorian starts in medium density units is 21% off the peak. Australia wide, the December quarter had the lowest housing starts since 2001. From a dramatic low, NSW showed the only seasonally adjusted improvement. According to ANZ economists, the underlying demand is 175,000 per quarter and the December period only provided 151,000.
Economic forecasters BIS Schrapnel predict apartment rents to rise 42% by 2011 and first home affordability is also at the worst on record, so buying is not an alternative for many.
Where to go from here? Increased rental returns and price growth will probably lead to enough investors returning to the market to stimulate the market for the extremely vital “off the plan sales”. Construction will then follow.
The State Budget importantly announced investor incentives with a higher minimum land tax threshold for investors. Now no tax will be paid for properties up to $225,000, assisting 28,000 owners. The top rate is reduced from 3% to 2.5%, a saving of $125m or $508m over 4 years. It also had a $510m programme to supply 2350 affordable homes for low income families in the coming years. The government initiatives are welcome yet stamp duty relief would have assisted affordability to occupiers who would no longer have to rent and to the investor who would increase supply.
The reduced taxes and correcting market forces will not have immediate impact yet will commence a slow return to more balanced conditions. In the mean time the investor will have a jolly old good time, yet at the expense of the renting public.