Enticing Investors back into the property market – The key to easing the present rental crisis and surging rents
With the end to the state of emergency on 28th March all eyes are on the rental market as Landlords are given the first opportunity in over 12 months to adjust their rents upwards, and with a vacancy rate stubbornly below 1% significant rental increases are already under way.
We have been reporting on the number of vacant properties for many years as a leading indicator to how the property market is performing. Back in 2016 there were over 11,000 rentals on the market at any one time. Steadily, this number has been declining as the supply has been taken up, largely by Owner Occupiers, and the generally poor performing market has kept new supply in check and Investors on the sidelines.
Quite remarkably, modest population growth from East Coast workers and returning West Aussies due to Covid has quickly tipped the scales and we have been living with a vacancy rate of sub 1% for several months.
Such a tight vacancy may assist Landlords achieve a higher rental return which many long-term Investors will feel is highly justified, however it can have serious negative consequences including the ability to source key workers required to take advantage of the improved market conditions whilst also putting significant pressure on social housing.
Incentivising private Investors back into the market is the quickest solution, especially given there are presently approximately 1,600 brand new completed apartments ready to be sold. Developers are reluctant to lease out their completed product for several reasons, including the fact that 90% of Buyers are Owner Occupiers at present and the Buyer loses a number of incentives such as qualifying for the First Home Buyers Grant.
One of UDIA WA’s key policy priorities for 2021 is fixing the rental crisis by working collaboratively with government on viable solutions. UDIA WA is proposing that the state government provide a short, sharp targeted incentive to Investors (as reported in the West Australian) who purchase brand new completed apartments on the condition they immediately made the property available to the private rental market. By offering the same 75% stamp duty rebate available to off-the-plan Buyers, you are likely to entice a number of Investors off the fence and into the completed market.
Addressing the rental crisis is not only important for those people already living in WA, but also critical for longer term economic growth and securing the workers that we need to continue to build momentum in the WA economy.
Whilst we expect Owner Occupiers to continue to be very active in the completed home market, Investors can be far more patient, especially if it means saving 75% stamp duty on entry. Enticing more Investors into the market and removing this anomaly will likely benefit current renters, future workers to WA and the State generally.
Of course, when buying a property considering things like stamp duty savings and first home buyer grants should be just one part of a number of key elements of consideration such as location, timing, design, amenity, price, rental appeal, maintenance, age of property, depreciation and tax benefits. Educating yourself across all these factors will ensure you make a more informed decision for your future.
If you are considering buying an investment property, then feel free to reach out to discuss your circumstances and see how we might be able to assist.
All the very best