Rental market needs to adapt to cope with new rules and needs

No doubt the taxes factor into the decision however there are a range of other reforms that have increased the riskiness of the investment, including:
-ending “no cause” evictions during a periodic tenancy (6 months notice not enough apparently)
-giving tenants a de facto right to have whichever and however many pets they want at the premises
-mandating energy efficiency requirements for rentals which will eventually make retrofitting existing homes uneconomical

As with any investment, investors will either seek an appropriately increased return for their risk (which in a supply constrained market is easily done through higher rents) or direct their capital elsewhere.

I agree banks won’t give people who are bad risk a mortgage.

Which means when investors drive up the price of housing, prospective home owners need to borrow increasingly leveraged amount, placing more of them in that category.

Glad we’ve cleared up that investors and landlords are most certainly (at least partly) responsible for more and more people not being able to afford their own home.

Which is borne out by the declining rates of home ownership in recent decades as more and more people are priced out.

It’s smart to recognise that all landlords are not the same. Some are not negatively geared and some are not there for capital gain. Individual investors are not the problem, nor are investors in general. Look at how this all started.

It was politicians and government policy that encouraged investors into the market by offering tax advantages, especially to high income earners. That then pushed up the cost of housing. They created a lucrative investment that has been pushed by the finance & real estate industries amongst others. Those who invested did so because it was offering good returns and little chance of losses, which is why people invest in any asset or industry.

@Chewy, it’s not investors driving up the prices. Many investors are not buying investment properties and are leaving the market – rental vacancies are the lowest they have ever been (0.3% in most places). When a rental property is sold that is one less rental property on the market and the rental vacancy goes down, which means rental prices go up. The price goes up when more people want to buy a house in a particular area. QLD prices have gone up a lot, and it’s definitely not because of investors (most investors have sold up and left the market and rental vacancies in QLD are extremely low). It’s because of high demand; many people moved to QLD from other States and sold their homes, and are looking to buy another house to live in. Just look at all the foreigners who are buying up homes here, and driving up demand and prices for housing. You need to expand your thinking, and see the bigger picture rather than always blaming a few small-time Australian investors. Australian citizens should definitely get housing cheaper than foreigners, and be able to buy a house in their own country; instead of blaming investors, you should be advocating for that to happen.

Jorie,
Whilst there are other factors impacting short term fluctuations in the market, the structural incentives given to investors have most definitely contributed to driving up prices over recent decades.

They lobbied for the government to increase incentives in their favour and then have exploited those incentives to drive up prices, all the while asking for even more incentives to be put in place.

And once again, if an investor sells up, it doesn’t affect the rental market significantly as it means someone else has purchased. The dwelling doesn’t disappear.

“They lobbied for the government to increase incentives in their favour and then have exploited those incentives to drive up prices, all the while asking for even more incentives to be put in place.”

Lmao.

Explain to me how subsidising a product causes the price of that product to —increase—

*grabs popcorn*

Dis gon be gud

Surely no one is that obtuse?

Are you seriously asking how an induced demand driven by taxation concessions for one part of a market can result in an overall price increase?

For a relatively supply constrained product that is mainly purchased with debt which can be leveraged many times?

Particularly when that part of the market can offset taxes on non related income AND then receive a discount on the capital gains tax payable when the asset is sold?

Really?

No really? Bahahaha.

Economics 101 for dummies, first print landlord edition.

So the incentive cause more investors to enter the market, increasing the supply of rental properties both in absolute terms and relative to owner-occupiers… and lowers the cost of supplying that service… and the increased SUPPLY of rental properties and lower COST BASE causes prices to…

Increase?

Really?

No really? Bahahaha.

Economics 101 for dummies is too advanced. Is there a course below 101 level for people that think this way?

I agree that economics 101 is too hard for you if you honestly believe what you just wrote.

There may be an increase in rental properties but that doesn’t commensurately come with an increase in dwellings because supply is still constrained and 90% of investment properties are existing dwellings.

So you now have incentivised investors who can both offset short term losses against other income and get a discount on the capital gains tax payable when they decide to sell and you think this cause prices to…

Decrease?

I’ve truly never seen someone argue this so obvious has been the effect on prices when these policies were put in place.

Hahahahahah

You yourself wrote:

“And once again, if an investor sells up, it doesn’t affect the rental market significantly as it means someone else has purchased. The dwelling doesn’t disappear.”

So if an investor sells to an owner-occupier, that doesn’t affect supply and demand because there is one less rental property and one less renter.

BUT if the government provides incentives for investors to buy properties, this somehow reduces supply and raises prices?

Lmfao.

Thanks for clarifying precisely how seriously your posts should be taken.

“BUT if the government provides incentives for investors to buy properties, this somehow reduces supply and raises prices?”

Can’t see anywhere that I’ve written it reduces supply, no wonder you’re struggling when your comprehension skills are so poor.

The entire argument is that supply of dwellings is significantly constrained. You’ve even agreed on this point repeatedly.

So when you create an artificial demand, souped up by the twin tax concessions of negative gearing and CGT discount, property prices will increase far above where they would otherwise be which flows through to all sectors of the market because supply cannot rise to keep pace.

It has been borne out by decades of evidence since these concessions were put in place.

“Thanks for clarifying precisely how seriously your posts should be taken.”

Thanks, it’s been fun helping you and I agree I have outlined the evidence clearly. Although I do suspect that the pure self interest that allows property investors to ignore obvious data to the contrary of their arguments will no doubt see them complaining again soon enough.

If landlords buying houses doesn’t impact on the supply of available houses, then government subsidies to increase demand for investment properties does precisely zero to harm the balance of supply and demand.

Hate to see someone foiled by their own argument lol

It doesn’t significantly affect the supply of new dwellings, which was my argument previously.

But i’m not sure how you’ve extrapolated that to equal it doesn’t affect supply and demand in the rental and property markets entirely.

There’s that poor comprehension again. LOL.

Lol

“And once again, if an investor sells up, it doesn’t affect the rental market significantly as it means someone else has purchased. The dwelling doesn’t disappear.”

So if an investor sells, it doesn’t affect the market significantly. But if an investor buys a property, (thereby adding to the total number of available rental properties) suddenly it affects the rental market.

Lmao.

Absolutely fascinating the mental gymnastics people will go through to justify their hatred of people who are doing better than them financially.

So funny to see the self interested are so blind that they don’t even know what the word “significantly” means. Particularly when the claim above was a response to someone claiming that an investor selling drives up rents.

There’s that lack of comprehension again.

Although glad to see you agreeing that investors selling up does not put significant upwards pressure on rent.

LOL.

The policies didn’t just magically appear they were lobbied and promoted by property investors who have then exploited the government’s repeated changes that have incentivised their investments.

They clearly contributed to the problem, continue to support these policies and vehemently oppose any changes as we saw at the 2019 election.

Landlords obviously benefit through increased prices because it means higher capital gains on their leveraged investments.

Who loses out?

Poorer people and renters who are driven ever further away from their own home ownership and forced to pay ever higher rents due to the overheated housing market driven by investors.

So it was the fault of omnipotent landlords and their irresistible lobbying and not that of the successive governments who introduced the policies that inflated the housing market.

Got it.

I suppose it was the fault of landlords that removing negative gearing didn’t get up at the last election, since renters are not allowed to vote?

Lmao

From what I understand it was actually landlords that conspired to shoot Kennedy. Clear Lee Harvey Oswald’s name!

No, no, you’ve got it all wrong.

The government just put those policies in place randomly for no reason whatsoever. And they continue with them just for the fun of it. There’s no political pressure involved from vested interests whatsoever and the politicians are not swayed by outside influence.

And the 10% of Australians who have interest in investment properties and the 70% of people who own property don’t even consider the impact of these policies on the value of their assets when they vote and clearly wouldn’t impact the outcome of elections if they did……

Landlords on the other hand are philanthropists, modern day Florence Nightingales if you will. They pour their hearts and souls into providing shelter for the poor and needy, only expecting a pittance of rent in return.

They should be lauded as kings amongst men. Surely a group awarding of Australian of the Year for all landlords is in order.

Well you heard it here first folks. Representative democracy is over. We are in the hands of the landlord oligarchy, all you serfs give fealty to your lords!

Those poor downtrodden landlords just looking to eek out a living.

The residential property market worth $10 trillion dollars conveys no political power whatsoever, surely a benevolent charity should take on the cause of the landlord to help them out from their dire straits.

Lol why would they need a charity when they apparently have controlled both labour and coalition policy for the past 3 decades?

Lmao

BRB signing up for landlord illuminati

Not saying this isn’t true and I’m always in support of people getting better access to reasonably priced housing in Canberra.

But it’s worth noting Canberra’s 3 electorates are all in the worst decile for residential property ‘net rent loss’ in the country. Canberra is a weird place for residential investment compared to other cities across the country.

The great news for Canberra landlords: High rent return, average or better capital gain.

BUT the bad news for Canberra residential property investors is high costs, restrictions, charges and taxes.

A good deal of property investment experts warn against choosing Canberra to invest in because of our high regulation and high costs to being a landlord.

IMO, landlords can do well in Canberra but they need to be savvy.

This is only relevant if the landlord sells. For some landlords, the rent they earn is their only income as they don’t have superannuation and are too old or unwell to work. The increasing value of the asset prevents them from getting a pension but the costs of maintaining the asset diminish the returns and thus their income. The landlord often earns much less than the tenant, especially in Canberra with well-paid public servants.

Agree @psycho. I have one rental property in the ACT (that was not purchased an as investment property but was my family home), it is very small, but the ongoing costs are exorbitantly high in the ACT. The tenant is a high income earner and earns 3 times my earnings (plus the tenant also has investment properties in other parts of Australia) – many tenants are also landlords, and some are very well off. However, the usual suspects on here refuse to acknowledge reality, and instead they pretend all tenants are exploited and hard done by – very untrue!

See Psycho is on the right track.

Investors are so poor and downtrodden that they often earn less income than their tenants.

All whilst holding assets that have had capital increases of hundreds of thousands of dollars in recent years.

But obviously they are so persecuted and powerless that they couldn’t possibly be expected to sell and realise that gain. They need the government to step in and provide them with further incentives.

They are often too old and unable to work. We truly need a Royal Commission in to this outrageous government treatment of the heart of gold, landlord class.

I rented out a house for seven years. Most of my tenants would have earned more money than I did. My wage was likely lower then the average wage. How did I manage to buy an investment property. Got lucky, bought at the right time, lived very frugally and had been saving for decades. I had made sacrifices for years, that many wingers are unlikely to make, such as sharing your own house with other people; initially strangers, to help pay the bills. Also growing a lot of my own food. Other things too.

Seriously? Perhaps we should drop the character generalisations in these types of discussions.

I think the point to be made is that investors have a choice as to which asset class and in which place they should invest their capital. Property, shares, bank accounts, exotic cars etc are all options.

If a particular asset class is less attractive than others, then a rational investor will invest in a better returning asset class. Similarly, if a particular location is less attractive than another, then a rational investor will invest in the more attractive location.

If there are insufficient investors in rental properties in a particular area there will be less rental properties available and logically shortage will arise and prices will rise.

The ACT rental return on investment – i.e. how much rent you get for $$$ invested – is relatively low. On top of that, the taxes and charges imposed in the ACT on rental properties are far higher than in many other places. And the ACT is progressively enacting rental reforms which relatively make renting more attractive for tenants and less attractive for the investor landlords.

So, I confess, I am an evil landlord investor. I have chosen to buy a property to make it available for someone else to rent and live in – just not in the ACT.

An evil landlord investor? Can’t believe you’d admit to such a thing.

Tell us, my lord, how was it that you personally convinced successive federal labor and coalition governments over the past 3 decades to offer -against their will – so many incentives, tax breaks and so forth to appease the landlord Illuminati?

With such vast influence, perhaps you could fix the income tax rates?