The incentives needed to boost investor activity in Australia
With Australia’s annual rent bill blowing out by $44 billion per annum over the last decade, there is a need for the government to remember what has caused this crisis, and subsequently look to the reform that can fix it.
Kevin Young, the president of Property Club, has elaborated on the ballooning rental costs being absorbed by Australians.
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In illustrating the extent of this crisis, Young stated that “a decade ago, the median weekly rent for an Australian home was $300 and now it has blown out to over $600 per week”.
“With nearly 3 million private rental properties throughout Australia, it means that Australian renters are paying nearly $250 million in rent every day.”
Young described how full-time adult average weekly earnings have been on an upward trajectory during the past 10 years, increasing by 30 per cent to $1,953 in the last decade.
Young contrasted this notion with the reality that in the last decade, rents have increased at more than three times the level of wage growth. The president further illustrated the need to curb this rental crisis by taking into account the record number of migrants arriving in Australia – the latest figures showing overseas long term and permanent migrants to Australia during January 2024 sat at 55,330.
That’s the highest January intake ever recorded, and something that Young said necessitates the need for government action to address the dearth of properties on the market.
He advocated for reversing two policy decisions he says are most responsible for crippling the private sector rental market.
The first is the reinstatement of depreciation benefits associated with owning second-hand properties that were repealed in 2017.
Young was vocal about his belief that the cessation of these benefits was largely responsible for de-incentivising property investors from buying lower-priced, second-hand rental properties that could be used as rentals.
Young is also lobbying for the reinstatement of interest-only lending without time limits for property investors.
The 2014 decision made by the Australian Prudential Regulation Authority to implement time limits on interest-only loans was singled out by Young as resulting in thousands of “mum and dad” property investors being forced to sell their rental properties after not being able to afford the new principal and interest loan costs after changing from interest-only repayments.
“Without action, rental prices will continue to surge upwards, driving thousands of Australians into homelessness,” Young said.
“Without immediate action to reverse these two bad government policy decisions, the rental crisis will quickly escalate into a national homelessness crisis,” Young concluded.
