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Property Investment Is The Solution To Australia’s Rental Crisis

THE Prime Minister may like to say he is helping those who can’t find a place to rent by helping Australians BUY a property, but from my point of view both the Federal Government and the Federal Opposition are yet to grasp just how enormous the rental crisis is in Australia.

There has been nothing in recent weeks which shows me that any of our Federal Politicians have any awareness of just how big a problem it is for everyday Australians.

Neither of the major parties has announced anything to support those many Australians caught up in the rental crisis and in fact there has been very little to address housing affordability in a meaningful way either.

Yes, there was the announcement that the Home Loan Deposit scheme would be expanded for three years to make it a little easier for First Home Buyers to get into the market, once they have saved a deposit of 5%, but that still doesn’t do anything about the ever-growing cost of housing.

Some analysts claim it makes it worse.

That scheme is really about encouraging people to buy or build a NEW home, which was already expensive before Covid started.

The price of new housing continues to rise at a dramatic rate, driven up by materials shortages and tradie shortages which means it takes twice as long for a home to be built, with prices continuing to rise the whole time.

This is all a flow on effect of the Federal Government’s wildly successful HomeBuilder scheme which was meant to help keep the construction industry ticking over during Covid.

Unfortunately, they didn’t bother to determine before they introduced the scheme whether there were enough people to build these homes and enough timber, bricks and steel with which to build them.

The building industry is now stuck fast in a profitless boom, a victim of its own success. Builders who are locked into fixed price contracts now going broke. They can’t complete homes in a normal time frame and meanwhile costs are rising at a rate of 20-25% in the past year.

Even before the recent cost escalations, the cost for a young couple building or buying a new home were already alarmingly high – with half the cost comprising government taxes, fees and charges.

And there was nothing in the Federal Budget or in the Opposition reply speech which addressed any of that.

It’s great the Federal Government will guarantee FHB mortgages on a 5% deposit, so you don’t get hit with additional Lenders Mortgage Insurance, but with house prices rising so substantially throughout Australia in the past 12 months, and the cost of NEW houses rising so fast, FHBs now have to save even more to try and get that 5% deposit together.

And while they’re trying to save that deposit, the rent they’re paying keeps rising – because vacancies are so low.

We are in the middle of the worst rental crisis Australia has ever experienced and I can’t see it improving anytime soon.

Vacancy rates are ridiculously low throughout Australia and rents keep rising.

The latest Domain vacancy rate report shows that Sydney and Melbourne vacancy rates are now below 2% while the remaining capital cities are below 1%.

A 3% vacancy rate is considered a balanced market, but the national average now sits at just 1% with most regional markets already well below 1%.

Rents are rising in some areas as fast as prices have been, if you can get a rental property at all, it’s at a much higher price than it previously was.

It’s a tragedy in Australia that people are sleeping in cars and living in tents because of the rental shortage – and there is nothing our state and federal governments are doing to fix the problem.

In fact, there’s no indication they’re even aware there IS a problem.

Everyone likes to talk about affordable housing, but this is a much bigger problem which affects the most vulnerable in our society.

About a third of Australians households rent. Ask anyone looking for a rental property, no matter where, and they’ll tell you it’s near impossible to find anything and rents are becoming alarmingly high.

The latest floods in Southeast Queensland and northern New South Wales will exacerbate the problem in those locations.

In 40 years of analysing property markets, I have never seen vacancy rates this low everywhere across the country, nor have I ever seen rents rising so fast.

It’s hard to fathom that the issue can be so dire, but nothing is being done by any of our state or federal governments.

The only way to fix the problem is to encourage property investment.

That’s how rental vacancies are created – by people buying a property and making it available for rental.

In the meantime, it’s a very good time to be a landlord in Australia.


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