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