Stockdale & Leggo’s chief executive Charlotte Pascoe believes landlord’s should be financially incentivised to stay in the market and attract new landlords. Picture: Rob Leeson.
The rental market could be hit with droves of landlords looking to list their investment properties for sale, stripping back available rentals further in already tight conditions.
Melbourne landlords are considering a mass exodus with property industry chiefs warning “thousands” are looking to pull out in a disastrous hit to the city’s rental market.
It’s prompted calls for the government to pause major infrastructure and spend funds building more homes, to cut back immigration, reopen the door to foreign investors and reconsider property tax reforms that have some mum and dad investors planning a move interstate.
Mum and dad investors account for about 70 per cent of Victorian landlords and talk of large numbers exiting has emerged at the same time as new analysis shows they’re also pulling back from building new rental homes.
PropTrack chief economist Cameron Kusher said the firm was tracking23 per cent of new listings across the nation as being sold by investors, with a likelihood the figure was higher in Victoria and indicating things would become “even tougher” for tenants.
“I wouldn’t be surprised if Victorian landlords were leaving,” Mr Kusher said.
Mr Kusher said he wouldn’t be surprised if Victorian landlords were leaving the market.
In addition to rising mortgage costs, the state’s property investors face a soaring tax bill that will hit more of them than ever before next year.
From January 1, the tax-free threshold for general land tax rates will reduce from $300,000 to $50,000 for the next 10 years.
There will also be an extra fixed charge imposed, starting at $500 for landholdings valued from $50,000-$100,000 and rising to $3675 for land holdings valued at or above $3m.
Many properties also had their land component revalued at a higher price at the start of this year, leading to higher taxation this year too.
Mr Kilian said landlords couldn’t carry the cost any more of their properties.
Real Estate Institute of Victoria president Quentin Kilian said the tax blow was the last straw for many investors and the future for tenants was “dreadfully concerning”.
“We have thousands of landlords who are getting ready to pack up and sell out,” Mr Kilian said.
“Some are doing it in frustration, others have pure economic reasons; they just can’t carry the cost any more.”
W.B. Simpson & Son boss and former REIV president Richard Simpson said he had sold a dozen former rental homes in the past few months, many to owner occupiers, and had never seen landlords selling at current levels.
“Probably 75 per cent of my listings are landlords selling out of properties because they have had enough or because they can’t afford it,” Mr Simpson said.
He added that the swap from a $300,000 threshold for land tax payments to a $50,000 one in January next year would lead to “big shocks” and more sales in March and April.
Ms Pascoe said the morning the land tax change was announced, all Stockdale & Leggo received phone calls from landlords wanting to get out of the market. Picture: Rob Leeson.
One of Victoria’s largest real estate groups, Stockdale & Leggo chief executive Charlotte Pascoe said without more incentives for landlords their numbers would dwindle.
“The morning the land tax change was announced, all our offices across Victoria received phone calls from landlords saying that they wanted out,” Ms Pascoe said.
“There needs to be some kind of incentive for owners instead of demonising them and saying they’re fine. They’re not fine. They’re struggling and that’s why they’re selling.
“If (tenants) don’t get a notice of a rent increase, they’ll get a notice to vacate. That’s as simple as it is right now.”
John Buller, a plumber and owner of nine properties across Melbourne, is putting three of them up for sale due to rising land taxes.
“I haven’t got any mortgages on my properties and I don’t make a cent,” Mr Buller said.
“I’ve worked six, seven days a week all my life to get these properties and to look after my future so I don’t have to draw on the government for retirement.”
The 66-year-old said he had 10 times more value in his property portfolio than he had in Australian shares, but would be $40,000 a year better off selling them and putting the money into the stock market.
One of Mr Buller’s properties in Doncaster East, will be up for sale soon.
Mr Buller said the only reason he isn’t selling all of his properties was because of capital gains.
Experts agreed the only way to end the rental crisis was to build more properties.
But with Victoria’s Big Build projects competing for the same workers and resources to build more homes, Mr Kilian and Mr Kusher said now was the time to look at pausing some.
Housing Industry Association and Herald Sun analysis of latest Australian Bureau of Statistics building approval figures showed just 9899 future rental properties were being planned by private landlords in the 12 months ending at May 31. They represent just 18 per cent of the 54,999 new homes approved, which was the lowest annual figure since 2014.
HIA chief economist Tim Reardon said these investors had been the bedrock of Victoria’s rental home market for decades, but now needed help.
“Mum and dad investors aren’t going to be able to do all of the heavy lifting, we are going to need institutional and government efforts to increase the supply of housing,” Mr Reardon said.
He said with foreign buyers largely forced out of Australia’s property markets by new state and federal rules and taxes since 2017, apartment volumes had been severely compromised. Just 137 were given the green light in May, the lowest number since 2007.
Mr Kusher seconded the call for more government involvement.
“We have tried leaving that to the private sector for a number of decades now and it’s resulted in the situation we are in right now,” he said.
Ms Di Natale there had been an influx of people using homelessness services. Picture: Esther Linder
Council to Homeless Persons chief executive Deborah Di Natale said Victoria needed to build 6000 more social housing residences every year for the next decade to catch up from “decades of neglect”. That number could rise as the number of people facing homelessness does.
“We definitely know that there are people who were in private rentals, but now with the rentals increasing and the increase in cost of living, it’s really making their ongoing housing arrangements really insecure,” Ms Di Natale said.
“There’s been an influx of people using homelessness services.”
Mr Kusher added that with signs of reduced rental home supply, Australia’s higher than average migration levels could also be reviewed.
“I’m very pro migration, but I think we need to have a discussion about what the appropriate level of migration is,” Mr Kusher said.
“When you can’t house the people here in the country, does it make sense to bring more and more people in and potentially making it worse for people already here.”
Transcribed from article that appeared in the Herald Sun on July 16,2023. Credit: Nathan Mawby and Sarah Petty, News Corp Australia Network. Melbourne rent crisis: Mass exodus of landlords to further constrict already disastrous rental market