Real estate industry warns of ‘perfect storm’ for renters and investors – ABC News
Single mum of three Alicia Johns spends almost half her weekly income on rent.
“It’s tight … we just budget,” she said.
“We do Kmart runs. I cook the same meals every week — that [the kids] hate.
“There’s nothing left over.”
Ms Johns has been in her Kingston home for roughly six-and-a-half years. In that time the rent has only gone up by $35 a week, to $495 a week.
But while she describes her landlord as “amazing”, like most Australians, she would like to own a home.
“There’s always that risk that … my landlord could at the end of the year say ‘I’m selling’ and it’s like well what next?” she said.
“The next landlord may not be as amazing … the thought of that is quite scary.”
She certainly could not afford a rent increase and, while it is generally cheaper to service a mortgage in Tasmania than pay rent, the “thought of trying to save for a house” is not only daunting but “impossible”.
“I couldn’t. It’s impossible to save for a house deposit,” she said, “I’ve written that idea off.”
‘Privileged’ not subject to rental hikes
Despite this, Ms Johns said she feels “privileged”.
“I’m so privileged to have this house for the price it is because my landlord could easily get $650-$700 a week for this place”, she said.
“I’m thankful that my landlord hasn’t jumped on the ‘Let’s raise prices just because we can’, but I know other people aren’t so fortunate and it’s so tough out there.”
The Real Estate Institute of Tasmania’s (REIT) latest report shows that in the past year the median cost to rent a house increased by 15.3 per cent.
But while rents are rising, they are not keeping pace with property prices — the median house price increased by 24 per cent from June last year.
Housing market gloss fading
REIT president Mandy Welling said this is making the housing market less appealing to investors.
“We’re starting to see the rental yields for landlords not be as beneficial as they once were,” she said.
“They’re paying a premium and … they’re private landlords, they need to run this entity as a business.
ABC News: Laura Beavis
“The last thing we want to see is them have to increase the rent in order to facilitate the loan payments on the property.”
REIT’s report found that in the June quarter investors made up about 19.2 per cent of all sales, below the 25 per cent required to stabilise the rental market.
At the same time, rental vacancy rates are at a historical low, with Launceston recording 1.1 per cent, Hobart 1.3 per cent and the North West 1.7 per cent.
Ms Welling said the much-discussed rental caps, would see investors “flee the market” and lower returns on investments could also drive them away.
“If we start to see less people invest in rental properties in the state, we’ll see [more competition and increased rents],” said Ms Welling.
“It’s a perfect storm in the worst way.”
She said lower interest rates were “helping keep a bandaid on the scenario”, but as mortgages rose, rents were likely to too.
“It comes back to the root of, we do not have enough supply,” she said.
“We have a huge volume of consumers out there looking to purchase real estate in Tasmania, but a shortfall of stock and that’s driving the prices up.”
At the same time, Ms Welling said mainland buyers were increasingly eyeing off Tasmania’s housing market, making up 17.4 per cent in June.
The majority were buying property to move to Tasmania.
“When we start to see things calm down [around COVID], I think we can expect to see a considerable amount of people make their way to Tasmania,” Ms Welling said.
‘Just because you can, doesn’t mean you should’
Kate Wadley has recently become a landlord, but she does not believe in charging the maximum rent.
“The rent that we charge on our property that we have just purchased is more than enough to cover our mortgage repayments,” she said.
“We made the decision that we would not overcharge even though we could. We could charge $100 a week more.”
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She has set up a group called We Are Fair for landlords that share the same view as her.
“It’s not the tenant’s responsibility to cover all your costs,” she said.
“If you expect your tenant to cover the cost of your investment in its entirety, then you shouldn’t be investing. You can’t afford it.”
She said just because house prices were rising, those landlords who already owned investment houses should not be increasing their rents.
“If your capital gains are increasing, it doesn’t give you the right to increase the rent.
“Just because you can doesn’t mean you should.”
Toll on real estate agents
ABC News: Loretta Lohberger
With the inevitable rise of interest rates and increased competition in the state’s housing market, Ms Welling said she only hoped Tasmania could address the lack of stock.
“I know a lot of people … think that this is a fantastic time for real estate agents … but it is very tough as well,” she said.
“To stand in front of people that are missing out consistently and trying to get their families where they want them to go and we’re the bearer of bad news — it’s just not fun at all.”
Ms Johns is happy in her Kingston rental, and counts herself lucky to be able to afford it, but says “it doesn’t feel like a home”.
“I’d love to put pictures up … have a dog, but we can’t do that,” she said.
“As much as I try to make it feel like my own space, it’s not your home.”
This content was originally published here.