Rental pressures ongoing
I've heard quite a few examples of extraordinary lease renewal rental increases in Sydney lately, and I'm pretty sure plenty of other parts of the country must be experiencing similar challenges.
While population growth continues at
around 1,700 per day, many landlords are still choosing to exit the housing market due a combination of higher insurance premia, land taxes, and mortgage rates, as well as increased compliance and running costs.
Some prospective investor borrowers are also being shut out by the redundant 3 percentage points lending assessment buffer, when markets are pricing for lower interest rates over the next few years.
Redom Syed at Confidence Finance calculates that borrowing capacity could increase by up to 35 per cent through 2024 and 2025, were lower interest rates and the Stage 3 cuts were to be combined with a reduction in the lending assessment buffer, but there doesn't seem to be any sign of relief from the regulator at the moment.
Source: Redom Syed, Confidence Finance
It's worth remembering this does come off the back of larger cumulative reductions in borrowing power in 2022 and 2023.
Plenty of folks seem to be cheering on the higher land taxes and the ongoing changes to compliance for landlords - and fair enough - but one gets the sense is that this is not necessarily heading to a good place.
For example, buyer's agent Andrew Date in Melbourne notes:
We're already getting a sneak preview of where this ends up locally in Noosa, where asking rents for houses have more than doubled - after taking into account the obvious seasonality on the Sunshine Coast - and people have variously been seen to be staying in tents, car parks, campervans, in spare rooms, on couches, or practically anywhere else they can find to sleep.
Source: SQM Research
We've even heard some politicians campaigning for cutting tax incentives for property investment this week, which would be a courageous political decision in the prevailing environment, as Sir Humphrey might've said.
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An updated look at global interest rate pricing, from 'the geezer' himself, Mr. Chris Weston of Pepperstoneshire:
Source: Chris Weston, Pepperstone
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