Have you ever wondered why we NEVER achieve solutions to the biggest real estate issues confronting Australia.
Housing affordability has been debated in the country for decades and every year it gets worse.
The rental shortage has been a reality for years and has attracted a lot of media attention and much political rhetoric, but vacancies remain at record lows and rents keep rising, with no resolution in sight.
And there’s a very good reason why solutions are never found to these core issues.
It’s because the finger of blame is always – ALWAYS – pointed in the wrong direction.
Fundamentally, it’s because politicians have caused these dilemmas and our politicians are very good at blaming others for the problems they have created.
With far too many of our politicians, this is indeed their ONLY talent.
And so it is, right now, with the rental shortage crisis.
When rents rise, the kneejerk reaction from media and from politicians seeking an easy scapegoat is to demonise the people who own rental properties.
Media likes to characterise them as “greedy landlords” and that makes it easy to slam them as the villains of the piece.
So it’s important to understand that, contrary to the media image, the typical owner of rental properties is not a wealthy individual with 15 or 20 properties.
ATO data shows that the typical owner of investment property is someone who owns just one property. They’re typically a mum-and-dad household earning around the average income and, according to surveys, their motivation for investing is to provide for their children’s education or for their eventual retirement.
They comprise about 75% of owners of investment properties.
Those who own five or more properties comprise less than 1% of property investors.
These ordinary Australians perform a key social function, because a third of Australian households rent and over 90% of the properties they rent are provided by private investors, with less than 10% provided by government.
The big problem is that these people are in short supply. In recent years fewer and fewer Australians have been buying rental properties. More investors have sold have bought in recent years.
This has occurred because politicians and bureaucrats have made a series of decisions over the past 5-6 years which, little by little, have made it onerous to own investment properties.
So more and more people have opted out of property investment.
This is created a shortage of rental properties, with vacancy rates the lowest on record.
A vacancy rate below 3% is a shortage, 2% is a serious shortage, below 1% is a national crisis.
And most locations around Australia have vacancies below 1%.
So that when a home becomes available for rent, there is typically a queue of desperate tenants at the open house. And someone in that queue will offer more than the asking rent to beat the competition.
And that is why rents are rising. The basic laws of supply and demand are causing rents to rise – and rise.
The problem is the shortage – and that has been caused directly and indirectly by the decisions of politicians, as well as bureaucracies like APRA.
If we want to fix this problem, we need to start by recognising how we got into this situation in the first place – and then ask the people who caused the problem, the politicians, to provide the solutions.
The only viable one is the provide incentives to ordinary Australians to become property investors.
There is no other way.
