The debate about the state of the rental market shouldn’t pit investors against tenants. It should look at the key issue, which is supply and demand.
Over the last decade WA hasn’t built enough houses to meet population growth. In addition, in the past few years we have seen a significant number of investors leave the rental market.
Low supply and rising demand are keeping the vacancy rate low and pushing up rental prices. These are natural market forces in action.
People rent for a variety of reasons. Perhaps they can’t afford to buy now, they may like to be able to move whenever they choose without the costs of buying and selling, or they may be living in a regional area for work purposes and have no desire to buy when they know they might have to move again in a couple of years.
Someone has to supply these homes. Governments are not, and this is why we need investors. They make up about 85 per cent of our private rental market. About 71 per cent of investors have one rental property – these are your ‘mum-and-dad’ investors.
Their investment properties are their retirement nest egg, their superannuation, a future for their children. They’ve worked hard to be able to afford another property, and it is hard work because when you crunch the numbers, rental income rarely covers mortgage repayments, especially when mortgage repayments have risen about 45 per cent since May 2022.
And while a lot is said about negative gearing, if you want to claim it you actually have to lose money – and you still are in the red after you claim this deduction.
Investors tell us owning an investment property is getting increasingly harder and the ongoing debate over rental reform isn’t helping.
We do need laws in place to ensure tenants are treated fairly, but those laws also need to allow investors to manage their asset appropriately. What we don’t need is political parties playing with the market.
When the market relies so heavily on private investors to provide housing for others you need a legislative environment than encourages investment, not deters it.
Which is why it has been good to see the WA and Federal governments recognise that supply is the issue and placing artificial restrictions on the market, such as rent freezes and rent caps, is likely to have a detrimental effect.
What we need is more land, improved planning processes, the capacity to build on that land, and to encourage solutions like build-to-rent and rent to buy.
Increasing supply is a slow process, but it’s great to see governments taking these steps.
Sourced from REIWA