Proposed rental reforms in Queensland could cost tenants more than $5,000 a year as well as result in thousands of job losses, according to research by Propertyology.
Analysis by property market research firm and buyer’s agency Propertyology has found rental reforms could see rents skyrocket by $100 a week as investors desert the market in droves due to new laws restricting a landlord’s asset ownership rights.
Propertyology Head of Research Simon Pressley said the mass exodus would cause a drastic undersupply of rental properties in a state with the nation’s highest rental population.
"The reduction in investor demand would also decimate employment in industries that rely on property transactions, such as construction," said Mr Pressley.
Source: Propertyology
“These ill-conceived reforms will create a major deterrent for any Queensland real estate-related business, which means lost employment opportunities for professions such as conveyancers, building and pest inspectors, and property managers – and it’s not like Queensland is leading the national pack for job creation.
“Queensland’s construction sector, one of the state’s largest employers, will also feel the brunt of this legislation as to get a lot of projects out of the ground, developers generally rely on investors for pre-sale commitments.”
Mr Pressley said that while the idiocy of the reforms was many and varied, it was the potential for soaring rents, the loss of landlord rights, as well as the negative economic impact that were the most concerning.
“The changes will mean that, even though they aren’t the owner of the asset, tenants will have the dominant hand when it comes to what they may do to a property and how long they live there for,” said Mr Pressley.
“It’s a fundamental right, an unquestionable expectation, that the property owner - as with any asset that anyone owns - determines the ‘who, what and how’ they control their asset.
“While tenants might currently think this new legislation is a dream come true, the probability is they will be faced with extreme household budget pressure sooner rather than later.”
Mr Pressley said if the legislation is implemented, the expected reduction in rental stock would result in some of the lowest vacancy rates in the Sunshine State’s history.
“Propertyology’s analysis concluded that it is quite feasible that rents in a number of Queensland locations could increase by $100 per week, or $5,000 annually, over the next two years,” said Mr Pressley.
“Propertyology has analysed case studies, drawn comparisons, reviewed the various influencing metrics, and modelled possible rental growth across Queensland’s biggest cities.
"A $100 per week rent increase in Cairns, Townsville and Mackay over the next two years is well and truly on the cards."
Why rents will skyrocket
Relevant to the forecast reaction from landlords is that Queensland property markets have significantly underperformed for more than a decade – a reflection of the state’s disappointing economic performance, Mr Pressley said.
Source: Propertyology
“With many existing owners of Queensland investment properties already disappointed by the poor financial performance of their assets, this new legislation will be the final straw for some landlords,” Mr Pressely said.
“Propertyology fully expects that a portion of existing landlords will remove themselves from the hassle and stress – they will sell – and for every investor that sells, that’s one less property supplying the rental pool.”
Mr Pressley said that, even if a conservative estimate of five per cent of landlords sell their properties that would result in 38,000 dwellings removed from the rental pool.
“To put that into perspective, those 38,000 homes provide shelter for about 100,000 people."
Record low vacancy rates and high rents on the horizon
Mr Pressley said Brisbane’s residential vacancy rates have been falling since mid-2016, which means pressure on rents is already building.
“Even before these ridiculous rental reforms were announced, rents have already started to rise because of more demand than supply,” said Mr Pressley.
Source: Propertyology
“The thing is, the fun and games are just really just starting with vacancy rates already well below the equilibrium point of three per cent in many locations around Queensland.”
The Propertyology research shows the real pressure in Queensland’s rental market is currently everywhere north of Hervey Bay.
The Propertyology analysis found over the two years ending November this year, average rents for a three bedroom house in Mackay has already risen by a staggering $3000 over the last 12 months, $1400 in Cairns, $830 in Townsville, and $728 in Bundaberg.
"Bundaberg, Toowoomba, Hervey Bay and Sunshine Coast already have a tight rental market," said Mr Pressley.
"It’s logical that a reduced rental pool from this legislation will drive rents sky high.
"Two years from now, rents could be $50 per week higher."
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