Dire warnings as Canberra's rental crunch worsens

Earthdog, you declare you have the wealth to support yourselves in retirement while assisting your children purchase property, as many of the generation do.
You then rail at ordinary costs of property purchase and taxation of wealth entailed in a land resource.
How do you think it is for people who cannot rely on parental wealth? Those who are also trying to build their own lives during low or declining real wage growth across a decade, but with no access to heritable wealth?
I am also amused to consider what sympathy you might get from parents who might have wished to help their children into the Melbourne or Sydney markets.

Yes most of your reply is correct. The current generation will have difficulty getting the money together given the existing economic conditions, which is why the ‘Bank of Mum and Dad’ is required. You make it sound as if the current slow wage growth is a new thing. Certainly been a thing since I started working in the 1970s. My parents (on a single income with five kids) did not assist when I first bought a house in Brisbane in 1997 because they could not afford to. My wages were frozen for four years before I retired after 40 plus years of employment. Houses and units are created by either public money (social housing) or private funding (either for living in or investment). As for what Sydney or Melbourne parents thinks, they made they made their choice for where they want to live. I happen to know that some friends in Sydney are fretting for where their adult children, who can only afford to live at home, will live if they ever retire (still paying the Sydney mortgage) which will be in their early seventies. My complaint is about the land tax particularly when individuals have to do what governments do not, that is provide affordable housing or a affordable environment where people can purchase a property to live in. I accept that the other costs have been there and continue to exist no matter what the government. I am glad I amuse you given our current crop of crappy, self interested politicians, belligerent world leaders killing people in other countries, climate change, increasing poverty etc. Why don’t we all try to get along?

Sorry. Just to clarify, my last statement is “railing”. Can’t seem to fix the world I live in and I just get cross with why humans are so stupid.

🙂

I feel you are a little too resigned, Earthdog. Wages growth (wage-price index) tracked by the ABS since 1997 hit a new low in 2013 and has declined steadily since then. AWE (an older series tracking males it seems) in 2013-14 hit its lowest ebb of growth since WW2. Wages share of income has been declining for decades and productivity growth is poor.
Perhaps rather than resigning society to this we might change society, not dramatically, but to reduce evident corruption, misallocation of resources, and lack of planning for recognisable futures.

You seem to be quite confused between land tax and stamp duty. They are very different things.
Land tax (which is different to Rates and Stamp Duty) in other States is based on the taxable land value you own in that State. Hence the name land tax. In NSW, property investors do not pay any land tax at all unless they have more than $822,000 in taxable land value in NSW (not including house value). In QLD you do not pay any land tax unless that amount is over $800,000. The ACT system does not work similar to other States at all. The ACT govt absurdly charges property investors (of even small units) outrageous amounts of land tax, even if the land value (not including unit or house value) on the property is only assessed at $200,000. Canberra has the highest rents of any city in Australia and it has been that way for several years now, and it IS mainly due to the ongoing exorbitant land tax that investors have to pay the ACT govt (in addition to high rates and stamp duty). The ACT govt is not ‘ahead’ or progressive at all, and is actually regressive and backwards, as evidenced by the refusal of the ACT govt to start rejecting their awful socialist agenda of ever increasing taxes on people.

Odd, jorie1, how you suggest I may be confusing land tax with stamp duty then fail to point out where or how.
No, I am not in any respect confused but your reading needs improving. For the bulk of your comments, did you notice I wrote “Several States have SOME land taxes” [emphasis added]? Thank you for adding detail to prove the accuracy of my statement and lack of confusion thereon. I note you quoted NSW and Qld where thresholds are around $800k (as you say) but neglected to go on to Vic where the threshhold appears to be $300,000.
You did not address the substance of my post. Should I be surprised? There is simply no evidence brought forward that current rental vacancy in Canberra is either distinct from other capital cities (it sits right in the middle of the class) or that it is consequent on the fact of (an incomplete progression to) land tax rather than stamp duty.
Regarding your personal dislike of land tax, what do you consider the relative economic costs and benefits for government and society of stamp duties on land transactions compared with taxes on resource rental (land)? You may consult text books. In fact, I would prefer you did.

I’ve consulted plenty of text books in my life (as I have several degrees), thanks. Evidence clearly shows: 1. That the ACT has the highest rents in Australia, and 2. There are far fewer rental properties available in Canberra than there were a year ago (the rental vacancy rate in the ACT is the lowest it has ever been). I have provided you with the statistics for these things (which you continue to ignore). You seem to want to refuse to acknowledge the terrible reality of what the ACT govt has done (perhaps you work for them ?) and the fact that high land taxes (the ACT has the highest land tax in Australia) has contributed to the high rents and rental shortage we are seeing in Canberra, and that these bad ACT policies actively discourage property investors from investing in Canberra (hence reducing rental stock, which flows onto higher rents etc.)

I don’t have a personal dislike of land tax (I actually think the NSW and QLD systems seem fairly reasonable). I do however have a dislike of how the ACT govt has set up a terrible ‘land tax’ system in Canberra and they were told it was a very bad idea years ago and what the consequences would be (which we are seeing play out now – very high rents, rental shortage etc.) and I think it is a very badly designed (and implemented) policy.

It is difficult to see by how much more you could avoid reality, jorie1. I will fisk this one for you this time, although I could be briefer.
You have previously consulted text books yet still have no argument to present in response to my request. Noted.
Your point marked 1, highest rents: So? Was that under dispute, or relevant? We were discussing vacancy rates, where ACT is now in the middle of the pack of Australian cities. Regarding that new point, here is a hint: median income.
Your point marked 2: Yes, vacancy is lower than it was a year ago, and higher than six other years I pointed out, so obviously not “the lowest it has ever been”. Why repeat falsehood when you were proven completely wrong?
The rest is reiteration of your personal outrage about land tax, not only unsupported by any economic data or argument from you but contradicted by the fact that the lowest six years of vacancy rates since 2005 were all prior to introduction of that tax here.

Well blow me down with a feather, Sam Oak thinks that the government should make policy changes that benefit Sam Oak.

If landlords could unilaterally increase rents as you claim, they would already be doing it. I would have thought you of all people would know they aren’t a charity.

More incentives to line Sam Oak’s pockets won’t result in any reduction in rents.

What really needs to happen is the Federal government needs to remove the current incentives and tax policies slanted to benefit investors that have driven up both property prices and rents.

Once that rebalancing occurs, prices will reduce over time allowing more renters to become buyers and freeing up market space.

On the supply side, state and territory governments need to make moves to more broad based land taxes to maximise the efficient use of land as well as ensuring that new greenfield sites are brought to market quicker and infill sites are provided the flexibility for a better mix of dwelling types.

Spot on Chewy – Sam Oak is for Sam Oak – the Land Guru Extraordinaire! Or so he thinks…….

Chewy, I’m speaking in the interests of all landlords and not just me personally. You seem to forget they are an integral part of the rental market unless you think rental services should be provided exclusively by the government.

Property ownership and management is not as easy as people seem to make it. Once you accumulate about 10 properties it starts to get really difficult to manage even with agents. There are all sorts of hidden costs, information asymmetry from tenants who cause damage, keep animals without your consent. There are far easier ways to earn passive income through a share portfolio but landlords are providing a valuable service to society people like you should be grateful for.

Sam,
Landlords are integral to the efficient provision of housing for people who aren’t looking to (or cant) buy. The overall amount of the market that is needed for this purpose is the issue.

You act like having more property investors is inherently a good thing when it clearly isn’t. Particularly when they are competing so strongly with first home buyers and owner occupiers, forcing more would be buyers back into rentals.

Also LOL at you trying to spin their purely financial endeavours into some sort of benevolent service.

Thank Zeus for landlords. Such generous creatures.

Why is having more property investors NOT a good thing? Deterring people from investing in Canberra (which the ACT govt is currently doing) is actually causing a lot of the current issues. Basic economics shows that if you have limited supply, demand (and prices) go up. It is not correct to say that if there were no rentals, all those people would magically own their own homes. You must realise that not every renter wants to buy a unit or house. Some people are not in a position to buy a house and they may actually want to (or need to) rent a place and there are many reasons for this (e.g. they don’t have stable jobs, the banks won’t lend to them, they are new to town and would prefer to rent for a while, international students, people who are unsure if they will stay in Canberra long term etc.). I know a well-off person who could afford to buy 5 houses, but he prefers to rent as he doesn’t like doing any maintenance and wants a care-free life in a modern unit.

“Why is having more property investors NOT a good thing?”

Jorie,
Most of your comment is already answered in my previous comments so I don’t know why you just ignore them in your response.

Let’s spell it out further.

Rental properties and investors are integral to the property market for people who don’t want to or can’t buy houses. I’d already posted this.

But the current level of investors in the market is well above this base level. There are a large proportion of renters who want to buy but can’t because of the significant level of incentives given to investors that have priced them out of the market.

“Basic economics shows that if you have limited supply, demand (and prices) go up.”

Exactly. And because there is a limited land supply and investors are crowding out people who want to buy, increasing prices, we end up with the problems we currently have. Thanks for agreeing with me.

Investors aren’t significantly increasing property supply, they are just boosting prices and feathering their own nests (eg. Sam Oak).

Private landlords add no value – they are just economic rent seekers attracted by bad government policy & incentives. I wouldn’t look to one for cost effective suggestions to address housing market failure, they are part of the problem.

“Historically, the social challenge of unequal access to housing was solved with public intervention to offer non-market housing at lower regulated price to first time buyers and renters.”

Evidence shows that investors are NOT outbidding first home owners for properties in Canberra. Investors are not buying investment properties in Canberra and, as a result, there is a low supply of rental properties in the ACT. Evidence clearly shows investors are selling their rental properties in the ACT and the rental vacancy rate in Canberra is the lowest it has ever been. Go take a look at some house auctions – it is foreign buyers, not property investors buying up houses.

“Basic economics shows that if you have limited supply, demand (and prices) go up.”
I was referring to rental properties. If supply for rental properties is reduced; demand (and prices ) for rental properties go up. As we are clearly seeing…

jorie1, may we have a reference for your “Evidence … that investors are NOT outbidding first home owners” please?
“the rental vacancy rate in Canberra is the lowest it has ever been”
Tripe. Look it up.

“Evidence shows that investors are NOT outbidding first home owners for properties in Canberra”

Patently false.

“Investors are not buying investment properties in Canberra and, as a result, there is a low supply of rental properties in the ACT.”

Except if this was true, it would mean renters are buying those properties, and hence the effect on the rental market is minimal.

The vast majority of investors aren’t adding to the overall pool of properties, they buy existing dwellings.

“Go take a look at some house auctions – it is foreign buyers, not property investors buying up houses”

What? You realise foreign buyers can also be investors right?

“I was referring to rental properties. If supply for rental properties is reduced; demand (and prices ) for rental properties go up. As we are clearly seeing…”

Except as I’ve already said, investors aren’t adding to the overall pool of properties, so your point isn’t true.

The limited supply in the ACT exists for all dwellings, so as investors are competing with owner occupiers, they exacerbate the affordability and availability issue.

Assiduous, do you not see that private landlords step in and ‘fill the void’ of the lack of social housing? The ACT government does not provide nearly enough social (public) housing for everyone – it provides very little housing at all – and social housing is a very expensive cost to the ACT government (buy land, build houses, maintain houses, repair houses, do property inspections, check tenants, conduct evictions etc.). The ACT govt loves that private landlords are housing people so that the government DOES NOT have to. Plus the government also taxes the private landlords huge amounts, so the ACT governments benefits THE MOST out of everyone from the private rental industry. The ACT govt get their taxes and don’t have to house as many people. It’s a winning scheme for them. I don’t understand why you cannot see that the government wants this system and loves it. They want you to blame and attack landlords, but if you open your eyes, you’ll see it’s the ACT government who benefits the most

Date 6 March 2022
‘According to Domain’s monthly Vacancy Rates Report, Canberra’s vacancy rate sits at 0.5 per cent, its lowest since Domain records began in 2017. This is down from 0.7 per cent in January and 0.8 per cent in February 2021.’ 6 Mar 2022

For the most part, renters are NOT the ones buying up properties. I’m not sure why you keep saying that they are. Most renters (as reported in many news articles) have said they are not buying properties, will never be able to buy properties, and that they will be life long renters (for various reasons including they don’t have funds, do not have a deposit, do not have long-term stable employment, banks won’t lend to them, cannot obtain mortgage, single parents etc.). You seem to have this wrong assumption that every home is sold to a ‘renter’ – it’s just simply not true.

“For the most part, renters are NOT the ones buying up properties. I’m not sure why you keep saying that they are.”

Other than investors, who exactly do you think is purchasing property?

“Most renters (as reported in many news articles) have said they are not buying properties, will never be able to buy properties, “

Link some evidence of this then. In reality, the opposite is true.

You seem to have the wrong assumption that investors are NOT pricing renters out of the market when the opposite is true.

Governments across Australia have abdicated their social responsibility for housing due to the drive to neoliberalism. Yet today we spend $60 billion a year on tax breaks and subsidies to vested interests that just make housing more expensive. Currently 35% of Australians rent when it could easily be 5-10%. That’s a lot of unnecessary property management, and moving of houses. The government is there to serve the people, neoliberalism is trickle down economics – a proven failure.

jorie1, that was pretty funny.
To my first request, for evidence that investors are NOT [sic] outbidding first home owners, your reply is, ….. nothing.
To my second point, you resorted to five years (apparently equalling “ever” or all time to you) of information from Domain who are not even mentioned in the article. The name on the research in the article is SQM. Might it not have been worthwhile looking up SQM who offer data going back to February 2005? Vacancy rates in Canberra were at or below 0.5% in 2011, 2010 and all the period 2005 to late 2008. Indeed, they were 0.2% to 0.3% throughout February 2005 to December 2007, i.e. about half the current vacancy rate, including 0.0% – 0.1% in June-August 2005.
Your claim that the vacancy rate is the “lowest it has ever been” is utterly false, or as I correctly put it at the time, tripe.
Oh, and did you notice that all of the periods I have noted with lower vacancy rates were prior to introduction of a land tax in the ACT? What do you imagine you are using for arguments? You like comforting shibboleths?