PRIVATE INVESTMENT KEY TO FIXING WA’S RENTAL CRISIS
Incentivising investment in completed apartments and getting more housing stock on the ground now is key to immediately addressing WA’s rental crisis according to the Urban Development Institute of Australia (UDIA WA).
“WA has experienced a long-term decline in residential property investment and we are suffering the consequences now,” UDIA WA CEO Tanya Steinbeck said.
“Private industry and private investment provide a significant proportion of rental properties to the market each year and without that investment, we are now experiencing a rental vacancy rate that is sub 1% and people desperate to find affordable accommodation,” Ms Steinbeck said.
“One of UDIA WA’s key policy priorities for 2021 is fixing the rental crisis by working collaboratively with government on viable solutions,” Ms Steinbeck said.
In full support and alignment with the State Government’s Housing Strategy 2020-2030, UDIA WA is proposing that the state government provide a short, sharp, targeted incentive to investors who purchase completed apartments on the condition they are immediately offered to the private rental market.
The state government has a target of supporting 130,000 households to access a private rental home, with the intention of developing a more diverse rental sector.
There are currently over 1,600 completed new apartments available for sale throughout the Perth metropolitan area (according to Urbis Apartment Essentials data which records apartments in buildings of 25 apartments or more), with the majority of stock in suburbs where there is a critical rental shortage.
The average sale price of the completed apartments represents on average 73% of the median house price within their respective suburb, highlighting the relative affordability of the properties (as at September 2020).
The newly completed apartments are ideally suited for rental, with a diverse range of 1, 2 and 3 bedroom options available in a variety of suburbs close to infrastructure and employment.
“Given the financial disincentives of state and federal legislation in developers renting the stock themselves, this is an opportunity for the state to proactively release the pressure valve on the rental supply crisis until housing stock created through the Building Bonus scheme comes online,” Ms Steinbeck said.
“By offering a short, sharp stamp duty rebate in line with the current off-the-plan rebate scheme to qualified investors with tenancy agreements in place, this is the shot in the arm that investors need who have been sitting on the sidelines waiting for the right opportunity,” Ms Steinbeck said.
“Property investor finance has fallen 75% over the past 5 years from an average monthly loan commitment of $889m in 2014/15, to just $218m in the 2019/20 financial year,” Ms Steinbeck said.
“This has led to a lack of supply which, coupled with significantly increased housing demand throughout 2020, has driven the rental vacancy rate to the historic low level of 0.9%,” Ms Steinbeck said.
It is this critical lack of supply that is what will continue to drive up the average price of rentals in the near term according to Ms Steinbeck.
“Already the property industry is reporting 10 – 20% increases on newly leased properties, prior to the lifting of the moratorium on rental increases on the 29th March 2021,” Ms Steinbeck said.
“Incentivising private Investors now to purchase a newly built apartment will bring instant supply into the market and assist to contain the price rises,” Ms Steinbeck said. “Without fostering investment, this crisis is likely to drag on for several years.”
“Stimulus measures to date, which have been very welcome, have focused on the new land market and have been extremely successful in keeping the residential property market in a positive growth trajectory and securing employment in that sector,” Ms Steinbeck said.
Addressing the rental crisis is not only important for those people already living in WA, it is critical for longer term economic growth and securing the workers that we need.
“Now is the time to harness WA’s reputation as a safe and stable place to live, work and invest,” Ms Steinbeck said. “We need to look at how we can harness WA’s fantastic response to COVID-19 and the strong position we find ourselves in to attract more people to the state.”
“How can we do that if there is nowhere for these people to live?” Ms Steinbeck said.
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