Feb 28, 2023 | Celsius Property Group News, Hot Topics

Help! We need more rentals!

Solving the current rental crisis is going to take an all hands on deck approach and it was pleasing to hear the Housing Minister, John Carey, speak so passionately about our government’s desire to assist across the housing continuum at last weeks UDIA Industry Lunch.

On the surface, it appears to defy logic that during a pandemic with closed borders and very limited migration we have lost so many active rentals in Perth. Cath Hart, REIWA CEO, quoted last year “The Department of Mines, Industry Regulation & Safety’s bonds data shows there were 222,432 active rental tenancies in WA during July 2022, which is 16,465 less than the 238,897 reported in January 2021 – when the number of active rentals in WA peaked. This has reduced even further to 221,869 active rental tenancies in WA during August 2022.”

REIWA have confirmed as of January 2023 this figure has now surpassed 18,750 fewer active rentals. So despite the stimulus housing coming online we are still going backwards in terms of active rentals.

I believe there are 4 key reasons for the significant reduction in active rentals:

1. Many Owners moved back to Perth during the pandemic and back into their homes and I don’t know of too many that are leaving again now the borders have reopened.
2. A reduction in shared housing during the pandemic for fear of either getting Covid or getting put into ISO if someone in your household got Covid.
3. An increase in house prices has seen a significant number of Investors decide to sell their Investment property with almost all investment properties that go onto the market being sold to an Owner Occupier further displacing more tenants.
4. Local Investors remain firmly on the sidelines.

The solution would appear all too obvious, simply build more properties and have Investors buy them!

Quite remarkably URBIS reported that in the September quarter of 2022, for the first time ever, not a single new apartment project was launched!

So we have a record low vacancy rate, continuing declining active rentals and an inability to get new projects out of the ground.

Short term solutions might include:

1. More shared housing as rental values continue to rise
2. Living at home longer or moving back in with Mum and Dad
3. Improved rental rates enticing Investors to hold rather than sell

In the medium term we need more properties built and to achieve that we need an all hands on deck approach.

The government’s announcement to assist with infrastructure charges in some locations at Property Council’s lunch last week is welcome news and in our view a step in the right direction.

However to get more rental properties into the market we need to consider these additional consumer focused steps:

1. Extend or make permanent the off plan stamp duty rebate and extend rebate to 75% for purchases prior to construction commencing.
2. Reintroduce the 50% stamp duty rebate to off plan purchases for properties under construction. This is particular important given the lack of Consumer confidence to buy off plan due to the high number of apartment projects that have had to be shelved over the past 12 months.
3. Remove the Foreign Stamp Duty surcharge to entice a significant pool of overseas Investors to choose Perth as their investment destination. Couple this with a Foreign Buyer vacant property tax to ensure these properties are occupied.
4. Introduce a new National Rental Affordability Scheme (NRAS).
5. Entice more Build to Rent development across the housing continuum.

Or we could sit back and wait for prices to escalate to a point where developments once again become viable but I fear that ends up with many more every day West Australians sleeping on couches or in their car and Perth losing its very attractive position of being one of the most affordable capital cities in the country.

At Celsius we are passionate about creating housing solutions for the occupant, whether an owner occupier or tenant. Celsius Property Group offers a broad range of services and has the expertise to contribute to much needed property solutions in WA with capacity across all our divisions – developments, project management, property and strata management, finance and sales.

We have our sleeves rolled up and are ready to assist in any way we can. If you have an idea that you feel might assist, feel free to reach out anytime.

All the very best

Richard