Broken rental market failing landlords, tenants since ‘90s

A concerning new white paper into private renting in Australia from the nation’s largest digital home settlements firm and researchers at funds management group Long View found Aussie property investors made an average 6.3 per cent return, after tax, between 1990 and 2020.In that same period, the return from the typical super fund was 7.4 per cent.RELATED: What it costs to rent a house and unit in every Victorian suburb right nowVictorian first-home buyers age: Why many are waiting until their 40sMelbourne median house price 9.9 times above typical household income, 8th highest in worldWith property prices lowering and rents increasing, some tenants are discovering they could swap their rent for a mortgage repayment and pay an equivalent amount per month. LongView co-founder Evan Thornley said the result was three in every five property investors over the past three decades would have been better off putting their money into their super funds after losing money to mortgage payments, tax, insurance costs and repairs.“We are not saying to take your money out of property and put it into super,” Mr Thornley said. “We are just trying to show that most landlords aren’t doing as well as people think they are.“It doesn’t work the way they had thought it would and they sell up. And that is the leading cause of rental insecurity.”With half of the nation’s rental homes built before the year 2000, he noted many landlords were not financially able to handle unexpected repair costs leading to patched over works that left the issue with the home to fester and cause long-term damage — worsening tenant experiences.The white paper noted close to half of all rental properties were withdrawn from the market within five years of being purchased as an investment.It also concluded that while Victoria’s relatively new tenancy laws had improved the situation for renters, the nation as a whole lagged behind world leaders in renters’ rights including Sweden and Germany, and even near neighbour New Zealand.Property Exchange Australia (PEXA) chief executive Glenn King said Australia was “one of the hardest places in the developed world to be a renter” and spending thousands of dollars to move as unsatisfied landlords sold homes out from under them made things worse.“Although median wages have largely kept pace historically, rent is increasingly unaffordable for lower income people and some of Australia’s more vulnerable demographics,” Mr King said. “More concerning, the difficulty in acquiring and keeping private rental accommodation is a leading cause of homelessness.”Real Estate Institute of Australia president Hayden Groves said the findings weren’t a surprise as the nation’s rental sector had changed over the years and the “allure for investors into property is becoming less enticing”. “And as a result what we are seeing right now is a massive shortage of rental supply in Australia,” Mr Groves said.With a growing chunk of investment properties currently selling to owner occupiers, he said addressing this was a challenge state and federal governments needed to address.However, he added that wise investors who retained a home for at least seven years were still using property as a good vehicle for wealth creation.Mr Thornley noted that while more houses tended to perform well compared to apartments, they weren’t all great investments — especially in areas outside of capital cities Brisbane, Sydney and Melbourne.The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered direct to your inbox.MORE: Victoria’s $38m apartment price record could soon be brokenGrand ‘Avon Court’ mansion with $38m-$41m price guide sells in less than a fortnightBrighton East: Award-winning build brings Brighton’s golden mile to suburb next door

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March 22, 2023 at 11:31PM
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A concerning new white paper into private renting in Australia from the nation’s largest digital home settlements firm and researchers at funds management group Long View found Aussie property investors made an average 6.3 per cent return, after tax, between 1990 and 2020.In that same period, the return from the typical super fund was 7.4 per cent.RELATED: What it costs to rent a house and unit in every Victorian suburb right nowVictorian first-home buyers age: Why many are waiting until their 40sMelbourne median house price 9.9 times above typical household income, 8th highest in worldWith property prices lowering and rents increasing, some tenants are discovering they could swap their rent for a mortgage repayment and pay an equivalent amount per month. LongView co-founder Evan Thornley said the result was three in every five property investors over the past three decades would have been better off putting their money into their super funds after losing money to mortgage payments, tax, insurance costs and repairs.“We are not saying to take your money out of property and put it into super,” Mr Thornley said. “We are just trying to show that most landlords aren’t doing as well as people think they are.“It doesn’t work the way they had thought it would and they sell up. And that is the leading cause of rental insecurity.”With half of the nation’s rental homes built before the year 2000, he noted many landlords were not financially able to handle unexpected repair costs leading to patched over works that left the issue with the home to fester and cause long-term damage — worsening tenant experiences.The white paper noted close to half of all rental properties were withdrawn from the market within five years of being purchased as an investment.It also concluded that while Victoria’s relatively new tenancy laws had improved the situation for renters, the nation as a whole lagged behind world leaders in renters’ rights including Sweden and Germany, and even near neighbour New Zealand.Property Exchange Australia (PEXA) chief executive Glenn King said Australia was “one of the hardest places in the developed world to be a renter” and spending thousands of dollars to move as unsatisfied landlords sold homes out from under them made things worse.“Although median wages have largely kept pace historically, rent is increasingly unaffordable for lower income people and some of Australia’s more vulnerable demographics,” Mr King said. “More concerning, the difficulty in acquiring and keeping private rental accommodation is a leading cause of homelessness.”Real Estate Institute of Australia president Hayden Groves said the findings weren’t a surprise as the nation’s rental sector had changed over the years and the “allure for investors into property is becoming less enticing”. “And as a result what we are seeing right now is a massive shortage of rental supply in Australia,” Mr Groves said.With a growing chunk of investment properties currently selling to owner occupiers, he said addressing this was a challenge state and federal governments needed to address.However, he added that wise investors who retained a home for at least seven years were still using property as a good vehicle for wealth creation.Mr Thornley noted that while more houses tended to perform well compared to apartments, they weren’t all great investments — especially in areas outside of capital cities Brisbane, Sydney and Melbourne.The report excluded homes that had price growth that more than doubled in the space of six years (a 12 per cent or more compounding annual growth rate) as that typically indicates a renovation or other additional investment in the property.Sign up to the Herald Sun Weekly Real Estate Update. Click here to get the latest Victorian property market news delivered direct to your inbox.MORE: Victoria’s $38m apartment price record could soon be brokenGrand ‘Avon Court’ mansion with $38m-$41m price guide sells in less than a fortnightBrighton East: Award-winning build brings Brighton’s golden mile to suburb next door