The Real Reason Behind the “Rental Crisis” ?
- Posted By Kamal Kanaan
The Australian media like to portray the cause of Australia’s rental crisis as a result of lack of supply, inflation, higher demand due to interest rate rises, delay in new builds, or changes in lifestyle during the pandemic, although all play a part much of the cause is actually due to a lot of landlords or the new correct term ‘rental providers’ turning to short term rentals.
According to sources the rental crisis is expected to get even worse in Melbourne over the next coming months as more return to the city and landlords raise rents where they can.
There has been a total of 25.7% decline in total new rental stock in Melbourne over the past year according to Prop Track’s latest rental report.
The question is why?
More and more landlords have turned their heads and focused on short-term accommodation in the likes of flatmates and the most popular Airbnb.
This not only provides the rental provider flexibility; it also can be more profitable and keep them in control of their big asset.
In early 2021 there were somewhat of approximately 147 new rental laws implemented in Victoria. The new laws set out a range of provisions to protect renters, including stipulations over the requirements for a number of basic amenities in every rental property and the new rules dictate renters cannot be evicted unless the Victorian Civil and Administrative Tribunal (VCAT) considers it reasonable.
What was called the ‘biggest reforms to rent in Victoria’ caused a snowball effect on the rental market in Victoria causing investors to either sell off their investment properties in today's ‘owner occupant market’ or move to short-term rental options to remain in control of their asset where the rules are less “tenant favored” according to some rental providers interviewed.
In March last year, REIV chief executive officer Gil King said that “increasing ownership costs and making maintenance and management of the property more complex is a deterrent for investment”, he also suggested, “higher rents and land taxes could see mum-and-dad investors exit this asset class, putting further pressure on rental availability and affordability for Victorians”.
It is safe to say the CEO's predictions came to fruition, with a large proportion of landlords exiting the marketing or adapting to new innovative ways of rental in the last 12 months due to their inability to meet the new regulatory demands.
The question is if the laws remain tenant-favored, will we see investors come back to the traditional ways of rental, or will short-term accommodation in the likes of Flatmates or Airbnb become the Australian rental market ‘new normal’?