By Anthony Webb
Current trends in Melbourne’s rental market suggest we may be heading towards a rental crisis in the next few years. With residential rental providers fleeing the market due to unfavourable conditions, rental prices are likely to soar.
The changes to the Residential Tenancies Act, which came into play at the end of March 2021, have been designed to make renting conditions more favourable for renters. However, these significant changes have become a catalyst for rental providers to sell up and in turn will likely lead to renting affordability issues as demand begins to outweigh supply.
After a year of reduced rents, the moratorium on evictions and high stress levels for residential rental providers, the new rental laws require residential rental providers to now spend even more money on their investments to meet the minimum standards of the amended RTA. For some residential rental providers, they are at breaking point, and would just rather sell their investment in the current strong market rather than spend more time and money on their investment property. This sentiment has been exacerbated by a lack of communication and clarity from the government regarding these amendments, leading to some throwing in the towel in frustration.
Many ex-rental properties on the market suggest residential rental providers are trading in their rental properties and chance of capital growth for short-term cash flow. Rental property providers are no longer looking at real estate as a vehicle for investment and have become jaded.
But our rental market cannot sustain this dwindling supply of properties, with the Federal Government already putting measures in place to mitigate this loss. The last federal budget stated there would be $5.5 billion set aside to build 5000 rental properties in the next 3-5 years to ensure a supply of affordable rental properties would be readily available. But this addition of 5000 rental properties will be a drop in the ocean to the number of rental properties that have already come off the market and will continue to do so.
Once our borders open back up, the eventual return of immigration and international students will only put more stress on our rental market and contribute to what is an inevitable rental crisis.
My advice to rental providers is to hold onto your rental property if you can. The increases in capital growth this year and my belief that rental amounts will go up dramatically in the next few years means the long-term gain will outweigh the current short-term pain.