Welcome to our blog, Australia Rental Affordability Issues.
Dear readers, this article of Australia rental affordability was written a few months ago, so, what you will find written here-under, is only the start of what is happening now. But let us start
with what we find 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 state-wide 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 discuss the reasons why in the past it was better.
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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, 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 at all.
Because there are a lot of overhead expenses to run the property.
So, the small investors have stopped buying rental properties, since they give
them lots of 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.
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.
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Let me state my 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 intitled 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. There are a lot of expenses to run a property, and a lot of problems. Today 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 a small profit from their rental properties, and the pensioners can make at least, as much money as the government
pension cut, then the small investors may be willing to invest in residential units,
and the problem can be 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.
To see more click on this link, Australia Rental Affordability Issues.
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