Luxurious rental properties are expenseve.
Talking about rental affordability issues.
Welcome to our article (129), Australia rental affordibility issues.
In this article of Australia rental affordability, let us start with what we have found on the news and internet, to show you what we mean. So, hereunder is a shortened report.
The latest property data from research firm CoreLogic reveals Brisbane has recorded a 3.8 per cent rise in housing rents in the three months to the end of September — the highest rise of any Australian capital city.
As Brisbane continues to face record low vacancy rates, rents have risen by 13.5 per cent statewide in the past 12 months.
CoreLogic research director Tim Lawless said that equates to about a $68 a week increase for a typical rental dwelling, or $3,536 annually. (End of report).
Well, I hope you see what we mean. So, in this article, we want to discuss rental affordability, because they say that in Australia most people cannot find rental accommodation, and if they do, they cannot afford to pay for it. But what are the reasons for these days’ rental issues. It looks like that there are less property available for rent, but what could be the reason for this shortage, and what can be done to fix it.
Well, if the present government wants to fix it, they need to build more rental accommodation themselves, then rent them on low rent, perhaps at no profit at all or at a loss. But even if the government does that, will they be able to build enough rental property and solve the problem for good, I do not think they can do that, because that takes a lot of taxpayer money, and a lot of time to build enough rental properties, so, let us look at the reason why this is happening, and if anything has changed that has caused this shortage.
It looks like that in the past, when the rental property market was run from the private landlords, and there was some money to be made, these things did not happen very often, because a lot of small investors would invest on rental properties. But today there is very little profit in owning rental properties because they cost too much to run, and there are many taxes, starting from the local government, the state government, and from the federal government.
Because it is hard to make a profit, people that have money keep away from investing on rental properties. So, in this article let us try to find the reason this has happened and continue to happen. We want also to find the reasons why in the past it was better.
Most people can afford to rent units like these.
Let us talk about the rental past.
Rental properties in the past were more affordable, because there were more small investors in the market, they were just people that had some money and instead of keeping it in the bank, they bought a rental property hoping that, when they retied, they could keep their affordable rental property rented, and they would be better off financially, in their old age, at least this is what they wanted, but today it does not work like that anymore.
Most of these people do not have enough money themselves, to become a self-funded retiree. So, they would rely on the government pension, for a modest living standard, but a lot of things have change, so, whoever is on a government pension, would be better off if they had no rental property.
Then, there are a lot of overhead expenses to run the property. So, the small investors have stopped buying rental properties, since they give them enough trouble and very little returns. So, what went wrong one may ask? Well, let us try to answer that question.
We all know that most economies are run on capitalism, this type of setting requires that you need to make more money from the money you have, this works out well, when everything works the way, it is supposed to work, and you know what you are doing. But sometimes it does not work that well. This happens when unforeseen expenses pop up, and at the same time the rental market goes down, so, there is no money to be made, the worst part is when you know that you cannot make enough money, to run your properties at a profit. I believe that this is what has happened in Australia.
Now, let us see why this has happened, who are the people that are interested in the rental market, and if there is a way to fix this rental shortage. I dare to suggest that the government may have to change some laws, that permits the landlords to run the properties at a small profit, because that is the only way to have enough properties in the market. Here I am not talking about the rich people that run large luxurious holdings and can make money, from their new units on high rent, because most people cannot afford that rent. So, we are looking for affordable rentals, that the workers or the pensioners can afford.
Let us see the people that can fix this.
Let me state my personal views.
I believe that there are two ways to fix the rental problem, one way is that the federal and state governments, build enough affordable rental themselves, and rent them at no profit or at a loss. The other way is to copy what we did in the past, because in the past there were more affordable rentals, since it was easier for small investors to have a property for rent, without losing money. Anyhow, what I am saying here is that we may have to go back and see what has changed, and if it is necessary, change it back the way it was before, since there were more affordable properties then.
Now we know that the private sector, can find ways how to supply all the rental properties required, but that must be done at a profit, so, the large companies are not interested to build affordable rentals, because there is not enough profit in them, then it is the small investors that can make the difference, and because there can be a lot of small investors that can be interested, if the laws permits them to have a rental property at a small profit, or as long as they do not lose other government entitlements, like the pension, then they could be interested to own a property for rent.
Now let me explain how it is possible to lose money. Small investor X lives in his own house and has a unit for rent, soon he is going to retire and hopes to receive the government pension, if he did not have the unit for rent, he would be intituled to receive the full pension, because the other assets he has, will take him past the limit he can have, before the pension is cut. But the unit is a real problem, because the net money he can make, is a lot less than the pension he loses, and that is the real problem, so, he believes that it was better if he did not have the unit. Then the last problem are the smoke alarms. Here the government makes laws that the landlords must employ a registered company to install the smoke alarms, but it does not say how much they are allowed to charge, so, they charge a lot, this can only make the rents dear.
This is what the government should take into consideration. So, I dare to suggest that, if the government makes laws that the small investors can make at least from their rental properties, as much money as the government pension cut, then the small investors may be willing to invest in residential units, and the problem is half solved.
Anyhow, this is one of the reasons I can see, why this rental shortage is happening. I can write other examples that can explain better the rental situation. But I hope people understand what I am saying here. This is all I need to say about this rental affordability issues in Australia.