Housing Market in Australia: The Continuous Rise and The Exodus of Landlords

The Australian housing market remains as unpredictable as ever. Despite enduring a global pandemic that severely impacted numerous economic sectors and faced a rapid inflation rate leading to a swift rise in the cash rate by the Reserve Bank, the market continues to flourish. On the other side, landlords, who’ve played a crucial role in the housing sector, are increasingly exiting, prompting questions about the long-term implications for renters and the overall housing market.

According to a recent article by Greg Jericho, despite the many challenges faced in recent years, average property prices rose by 2.8% in the June quarter this year. More remarkably, “average residential prices across New South Wales are now $284,000 higher than they were in December 2019 and $261,000 higher in Queensland.” As Jericho puts it, “come the nuclear holocaust the only things remaining will be cockroaches and Australians still trying to outbid each other at an auction for a place to live in.”

While housing prices seem to withstand almost anything, the affordability of these homes has not been favorable. As Jericho points out, “the past three years have not been good for housing affordability – either buying a house or, due to increased interest rates, paying the mortgage of one.”

Yet, despite the seemingly good investment opportunities in the housing sector, Jesse Thompson’s article highlights a growing trend: landlords are selling up. Many attribute this exodus to rising taxes, changing tenancy laws, and biting interest rates. Alison Dougherty, a long-time landlord, mentions, “I was finding it was getting quite complicated with the new changes and, increasingly, there were more costs being put on the owner.”

Nicola McDougall from the Property Investment Professionals of Australia (PIPA) emphasized this growing trend by saying, “Many are selling their properties. Many are selling all of their properties.” She also noted that “a significant percentage have actually said they will never be an investor ever again.”

The implications of this trend can be concerning. With fewer properties being purchased by fellow investors year-on-year, it’s likely that these properties are being removed from the rental market. This can lead to various challenges for tenants, including evictions, rent hikes, or properties transitioning to short-term rentals. Dr. Michael Fotheringham from the Australian Housing and Urban Research Institute suggests that a balance needs to be found, emphasizing the importance of “trying to find a balance of rental reforms that benefit the tenants without being punitive to landlords.”

In conclusion, while the Australian housing market seems resilient in terms of prices, the shift in landlords’ perspective and the challenges faced by tenants cannot be ignored. It becomes increasingly important for policymakers to strike a balance ensuring the housing market remains robust while also providing security and fairness to both tenants and landlords.

References:

Source: House prices just keep rising – everyone but the Australian government can see it’s a good investment by Greg Jericho. https://www.theguardian.com/business/grogonomics/2023/sep/12/house-prices-just-keep-rising-everyone-but-the-australian-government-can-see-its-a-good-investment