Gottiboff: Will nobody think of the landlords!?

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Robert Gottliebsen claims that Australia faces a “landlord crisis” and escalating rents once the moratoriums that allowed residential tenants to defer their rent obligations for most of 2020 expire in late March.

According to Gottliebsen, many landlords will either decide to sell their rental property or leave it vacant, and this will make the current shortage of rental accommodation even worse and force sharp increases in rents:

Landlords owning houses will normally have enjoyed a rise in the value of their property to compensate for any income loss but apartments in most situations have not fared as well…

Katrina Grace Kelly quotes the head of research firm and buyers agency Propertyology, Simon Pressley: “The single biggest story for Australian real estate for these next few years will be fast-rising rents.”

The simple answer to the problem is to increase the investment in rental property and there is abundant capital available to undertake this task. But state governments, in trying to protect tenants, are actually often acting against the interest of those tenants by forcing up the rents.

It’s hard to take Gottliebsen’s scaremongering seriously when the federal government’s own forecasts show that Australia is facing a large surplus of dwellings in 2021 and 2022, thanks to the collapse in immigration:

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At the same time as underlying (immigration) demand has evapourated, new home construction is being financed at an unprecedented rate:

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So where is this sudden rental tightness going to come from?

Mortgage rates are the lowest they have ever been and outside of heavily oversupplied Sydney and Melbourne, rental yields are juicy. So there is already ample incentive for investors to enter the market.

Sure, some investors may decide to sell, but this stock will either be purchased by another investor or a home buyer, leaving the rental supply-demand balance largely unchanged.

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The only “landlord crisis” is that of falling rents afflicting investors of Sydney and Melbourne apartments.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.