The Federal Government is exploring changes to capital gains tax concessions as part of efforts to make housing more affordable. While much of the debate has focused on home prices and investor incentives, one key group is being overlooked: renters.
“Investor policy cannot be separated from rental outcomes. The two are directly linked,” says Nerida Conisbee, Chief Economist at Ray White Group. She explains that when investor participation falls, rental supply tightens, pushing rents higher.
Private “mum and dad” investors are the backbone of Australia’s rental market.
“The data shows that individual investors own the vast majority of rental properties in Australia. Private investors have also carried most of the burden in expanding rental housing over time,” Ms Conisbee says.
Victoria illustrates the consequences of higher taxes on investors. Additional land taxes and holding costs have slowed investor participation, reduced rental listings, and contributed to faster rental growth. Over the past five years, Melbourne house prices have risen around 20 per cent, while rents have jumped 34.9 per cent.
Build-to-rent developments are often proposed as a solution, but Ms Conisbee warns that their scale is too small to replace private investors.
“Even with a significant number of projects underway, build-to-rent will account for approximately 0.58 per cent of total rental stock in Melbourne for many years to come.”
She concludes that housing affordability ultimately comes down to supply.
“If population growth continues and housing supply does not keep pace, prices and rents rise. Encouraging more investment in new housing increases rental supply. Discouraging participation reduces it. If the objective is to improve rental affordability, the policy focus must be on expanding supply.”
