Negative gearing debates driving rental prices

By Hannah Blackiston 10 March 2017 | 1 minute read

According to the latest figures released by REA Group, rents are continuing to rise as demands for housing are not met.

Negative gearing debates driving rental prices

“Continued unaffordability in our big cities in the buy market is forcing people to turn to renting and just like in the buy market, it’s abundantly clear that supply of rental housing has not kept pace with demand,” said Nerida Conisbee, REA Group chief economist.

Her comments come on the back of the REA Group Property Demand Index – March 2017, which shows rental demand is continuing to rise across the country, and the demand for housing has reached a new high.

“Demand for rental properties is strong across the country, but there is significant variance between states. Queensland, Tasmania, ACT, Victoria and NSW have the strongest demand for rental housing, which is consistent with what we are seeing from buyers. It reflects conditions in those markets that impact both buyers and renters – a combination of economic growth and far too little supply,” said Ms Conisbee.

Ms Conisbee said the figures show that the amount of property investors in the country is obviously not high enough to provide adequate numbers of rental properties, and that any changes to negative gearing could reduce these numbers further.


“The negative gearing debate continues to heat up, but the incredibly high levels of rental demand suggest that any changes to the way rental housing is provided in Australia needs to be carefully considered. If negative gearing is taken away, there may be less investors in the market meaning a sudden drop in available rental housing. The upside is that it could also slowly moderate the rate of house price growth in our most unaffordable cities,” she said.

In regards to the buyer market, the figures showed that demands are continuing to rise, driving buyers out of the capital city markets to urban fringes, or rental options.

“In all states, buyer demand increased over the month, even in the relatively subdued market of Western Australia. It is still too early to say whether the West Australian market has reached the bottom of its cycle with year-on-year declines still apparent,” said Ms Conisbee.

“Tasmania continues to be the strongest market, attracting interest from local buyers, as well as buyers from interstate and overseas, while NSW and Victoria are still attracting very high levels of interest,” she said.


Negative gearing

Negative gearing occurs when the rental income of a property is not enough to cover the total costs of managing the rental and re-paying the interest portion of the loan.

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Negative gearing debates driving rental prices
Negative gearing debates driving rental prices
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