New laws to change the rental market

LANDLORDS in New South Wales will be limited to seeking rent increases once a year under proposed state government legislation.

There will be no rental hike price restriction, just a 12 month period before any rent increase can be sought from existing

occupants, as part of what Matt Kean, the Better Regulation Minister, heralded as “sweeping reform for tenants’ rights.”

Less frequent rent increases will certainly help tenants plan for their cost of living pressures.

But there will be some ramifications.

The restrictive new law, which is yet to be passed by parliament, could see some investors sell up and exit the market. Others maybe be tempted to try the short-term accommodation market.

At a micro-economic level, some landlords will now insist on six month rental agreements, with the possibility of tenant turnover potentially allowing a higher rent.

Of course it is one thing for the investor landlord to seek rent increases, the other is the economic circumstances to be able to get it, and without losing weeks in an empty property.

On the macroeconomic front, prospective investors who will be calculating revised potential yields, are not going to spend as much to initially buy their investment property.

The cap on the timing of rental increases mimics the policy implemented by the Labor Government in Victoria, whose aim in a much broader reform package was to reposition investors as housing providers with responsibilities.

The historic primary aim of property investors has been wealth creation through finding and holding a property for the long term, without undue interference from government intervention.

With capital growth on investment property currently slowing across Sydney, the Berejiklian government proposal comes at a time when investors are sharply focused on their rental return.

And landlords don’t need to be reminded they aren’t that flash. From rentvestors to experienced property investors, it was easy to overlook the significance of rental yields when Sydney property were rising with annualised 15 per cent growth.

Rental markets remain relatively subdued across Sydney, partly due to an increase in rental supply accompanying the surge in apartment construction.

It is also because there has been a reduction in demand as first home buyer numbers have risen.

CoreLogic recently noted Sydney rents were down 0.9 per cent over the past twelve months.

CoreLogic expect rental yields will continue to be sluggish.

The Sydney gross rental yield is tracking at 3.2 per cent. It is 3.8 per cent for apartments, and just 3 per cent for houses.

The national gross rental yield is tracking at 3.73 per cent, lower than the decade average of 4.27 per cent. Nationally it is 4.2 per cent for apartments, and 3.6 per cent for houses.

The Daily Telegraph /SEPTEMBER 28, 2018


Australia’s population surges on the back of overseas migration

Australia’s population is surging, driven by large numbers of new arrivals from overseas, data released on Thursday shows. Strong population growth will underpin demand for property in the years ahead, particularly on the eastern seaboard.

As the Australian Bureau of Statistics alluded to in August, the population has now hit 25 million, aided by the 380,722 people that were added to the population in the year to March. Annual population growth has slowed slightly, but remains at a high level.

Over the past five years, Australia’s population has increased by 1.86 million people. In comparison, between 2003 and 2008, Australia’s population increased by 1.47 million people.

Migration remains the major driver of population growth. Over the past year net overseas migration was 236,786, accounting for 62 per cent of population growth. While migration remains strong, it is about 20,000 lower than a year ago. Similarly, net permanent and long-term arrivals were the highest annual total since May 2014.

As has been the case for most of Australia’s modern history, and despite ongoing government efforts, most new arrivals will head to our big cities. Migrants are attracted to cities due to better job prospects and to be near family and friends already living in Australia. In 2016, 83 per cent of people born overseas lived in a capital city, compared to 61 per cent of people born in Australia.

At a state level, Victoria recorded the fastest annual population growth rate of 2.2 per cent, or 137,395 people. The state’s population has grown at more than 2 per cent a year since 2012.

Net overseas migration into Victoria and NSW has fallen from record highs, but it remains elevated with migration accounting for 80 per cent of NSW’s population growth and 61 per cent of Victoria’s. Tasmania’s population growth rate of 1.02 per cent was the highest since 2009.

At the other end of the scale, the populations of South Australia, Western Australian and the Northern Territory are growing slowly. Northern Territory’s population increased by only 306 people. But while WA’s population growth rate of 0.82 per cent was low, it was the fastest growth since 2015, reflecting an improving WA economy.

A growing number of people are leaving NSW to head to other states ? in the year to March, a net 20,506 people left NSW, the largest outward net migration from the state since 2009. High housing costs in Sydney are likely a major reason for this movement.

Most people leaving NSW headed to Queensland or Victoria. While people continued to leave WA for other states,  the outflow was the lowest since 2016.

Strong population growth over the past decade was a big contributor to the growing demand for housing, along with other factors such as record-low interest rates and strong investor demand. Australia’s population growth rate jumped in 2006, but housing construction was slow to respond, particularly in NSW. This led to an undersupply of housing, particularly in NSW, and contributed to higher house prices (although some studies dispute this).

But in recent years lots of new housing has been built. There were 211,000 dwellings built in Australia the year to March, compared to 187,000 just three years earlier.

And as our cities have grown, higher-density housing such as apartments and townhouses are making up a growing share of new construction. This new housing has eroded any undersupply and contributed to prices falling (or growing more slowly) in Sydney, Melbourne and Brisbane, alongside actions by regulators to slow investor borrowing.

But while there is plenty of new housing in the pipeline to be built, there are signs of a slowdown in construction, such as a decline in the number of cranes being used for residential construction.

Government population forecasts are for strong population growth to continue – the Greater Sydney Region Plan projects that Sydney’s population will reach eight million in 2056 and Melbourne’s population is predicted to hit 7.9 million in 2051.

To meet this demand, the high levels of housing construction in our major cities in recent years will need to continue. With growing community resistance to more development, building enough housing to meet a growing population will continue to be a major challenge for all levels of government.

 SMH/SEP 20, 2018


‘The property market is now essentially broken’: One third of Aussies ‘priced out’ of their own home

WHEN photographer Rose Le Febvre and her husband bought their house in Putney, a leafy suburb on the Parramatta River about 10km northwest of the Sydney CBD, “no one wanted to live there”.

In 1999, they paid just $365,000 for their battle-axe with water views of the river.

Last year, it was valued at $1.8-$2 million.

ccording to CoreLogic, the median sales price in Putney is now $2.4 million.

“We were very, very lucky,” the 53-year-old said. “Our friends bought down in Francis Road near the river, their house would be over $3 million ? they paid $450,000.”

With prices skyrocketing since the late 2000s, Ms Le Febvre is one of more than a third of Aussie homeowners who are “priced out” of their own home.

New research by comparison website Mozo has found 35 per cent of homeowners say they are now living in properties they could no longer afford to buy if they were to try to make the purchase today.

Since 2009, prices in Sydney and Melbourne have risen by 105 per cent and 93.5 per cent respectively. Over the last three decades, property prices have risen by 600 per cent, far outpacing growth in incomes.

“I feel like (even) if we sold we couldn’t buy around the market, we’d probably have to look at another area,” she said. “If we wanted something equivalent we’d probably have to go another $300,000-$400,000.”

Ms Le Febvre, whose three children are still at university, said most of her family had moved up to Newcastle because they had simply been priced out of the Sydney market.

“It tells me the property market is now essentially broken,” said Mozo property expert Steve Jovcevski.

“If one third of Australians basically can’t afford the property they own today, what hope is there for people who currently aren’t in the market?”

Unsurprisingly, 95 per cent of homeowners said they had no regrets about purchasing their property. One in five estimated their home had increased in value by up to $300,000 since purchase, 20 per cent estimated growth of up to $700,000, while 6 per cent placed their gains in the staggering $900,000-plus range.

According to the survey, 40 per cent of Australians purchased their home between 2011 and 2018, while a further 28 per cent bought between 2001 and 2010.

“Some people have earned $900,000 without doing much except paying off their mortgage,” Mr Jovcevski said. “Some of these people have become millionaires over the last few years simply by holding their property.”

While the property market has begun to cool ? Sydney and Melbourne are down 5.6 per cent and 3.5 per cent from their respective peaks ? Mr Jovcevski believes there little chance prices will become more affordable any time soon.

“Even if they came down 15 per cent from top to bottom, they would still be where they were around 2016 when prices were still high,” he said. “If they do correct and stay there for a few years, maybe wages will catch up, but that’s a big if.”

The introduction of stricter lending criteria by the banks may dampen investor demand and reduce some upwards price pressure, but it is a double-edged sword that also hurts first homebuyers, he added.

Mr Jovcevski believes the message is clear ? the Australian dream of owning a home is simply “over for a lot of people”.

“Many Australians who once dreamt of owning a home are now looking at alternative solutions to financially safeguard their future as they come to face the reality that owning a home may no longer be possible,” he said.

“Also, a lot of those people that did buy realise it’s fine for them, but what about their kids? How are their kids going to be able to afford a home? Sure, I’m going to have more equity, but how much of that will I need to give to my kids to help them get a foot on the property ladder?”

Ms Le Febvre agrees. “My biggest concern is my children,” she said. “We’re going to encourage them to buy a property between the three of them, but they’re all still at uni so that’s not going to be possible for a couple of years.”

She hopes house prices come down “for my kids, yes, but for our future, maybe not”. “That’s a double-edged sword,” she said. “Definitely for my children to break into the market.” SEPTEMBER 15, 2018

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