Inflation has risen at more than twice the rate of weekly rents over the past decade, forcing many landlords to say “enough is enough”.
Research from property academic, Peter Koulizos, found rents increased just 11 per cent nationally over the past 10 years, while inflation rose 25.6 per – a shortfall of nearly 15 per cent.
The research, commissioned by the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA), showed mining-focused Perth and Darwin had the largest shortfalls with rents dropping 2.7 per cent and 5.9 per cent, respectively, in the past decade.
Rents in Sydney are at the same level as 2016, while Melbourne rents remain at the same level as 2018.
Hobart, with 37.9 per cent rental growth, was the only capital city in Australia where rental growth exceeded inflation over the past decade.
Mr Koulizos said investors were losing ground to inflation, which hurts sentiment and discourages further investment.
“These results clearly show that rental growth has been below inflation for more than a decade, even with the recent spurt of rental price pressure,” Mr Koulizos said.
“As well as their cash flow taking a hit because of this income versus inflation imbalance, investors have also had to finance a huge variety of additional costs levied by all levels of government over the past decade.”
On an annual basis, rents increased about one per cent per year, versus an average inflation increase of more than two per cent each year in the decade.
“Governments deserted the supply of affordable rental properties years ago, expecting private investors to simply take over this responsibility, however more and more investors are deciding that it’s just not worth it,” Mr Koulizos said.
PIPA Chairwoman Nicola McDougall said the volume of investors in the market was below historical averages for half of the research period, predominantly due to lending restrictions.
“The lending restrictions in 2017 unfairly targeted investors, with many unable to transact for a number of years,” Ms McDougall said.
“From that period on, the supply of rental properties started to dwindle because investors simply couldn’t qualify for finance – but this research shows that rents had not kept up with inflation.
“Since the start of the pandemic, investors were initially asked to ‘take one for the team’ and supply free or low-cost housing to their tenants; are continually expected to pay higher costs for everything property-related – from council rates to stamp duty; and will soon be ‘double-taxed’ by the Queensland Government.
“It’s little wonder that we have heard of investors selling their properties in droves over the past two years because many have simply had enough.
“And let’s not forget that 71 per cent of investors own one property and 90 per cent own just two – this has always been the case – contrary to popular opinion about a plethora of mega-rich people who seemingly own dozens of properties.”
PICA Chairman Ben Kingsley said private owners of rental properties had shouldered the bulk of rental supply heavy lifting over the past two decades, while governments axed billions of dollars from public housing funding.
“These rental providers have also been pressured to carry the full financial burden of rising interest rates, new tenancy reforms, eviction moratoriums, land tax reforms, huge and costly delays in tribunal dispute hearings, and yet over the past 10 years, outside of Hobart, rents haven’t been keeping pace with inflation,” Mr Kingsley said.
“The current rental crisis is the result of government inaction and market interventions. There is no question that governments, at all levels, have played the biggest role in the rental supply mess – but, year after year, they expect private rental providers to simply pay more and more.
“Well, I’ve got news for you, more and more investors are saying ‘enough is enough’ and are selling up with many, many more expected to follow. The severity of the current rental crisis will look like a walk in the park compared to what will happen next, mark my words.”