THE RENTAL TRAIL … ER !! SO WHO IS THE GOOSE TODAY ?

THE RENTAL TRAIL … ER !! SO WHO IS THE GOOSE TODAY ?

“Trailer for sale or rent – rooms to let 50 cents”!! Yes – ladies and gentleman a trailer park (or in the Aussie vernacular, a caravan park) will be coming to a suburb near you soon. Or subject to council approval, a caravan in a back garden adjacent to the Hills Hoist (and just when you thought the days of Millard and Viscount were a thing of the past). This is not just something that happens in America!

Rental crisis ? Not so if your email address has a gov.au after your name. Of course not – as politicians would have you believe that there is no need for concern. Prospective tenants love nothing more than inspecting rental properties on their weekends and are always happy to stop for a timely snapshot, to record their exuberance whilst waiting to inspect.

This photo, courtesy of The Sydney Morning Herald, appeared in last Saturday’s edition titled “More than 100 queue to see cheap flat”. This two bedroom apartment is classified under affordable housing zoning and the weekly rent is therefore capped at $295.00 per week. This is less than one bedroom apartments in the immediate vicinity. The inspection attracted as many as 150 interested parties and the letting agent fielded over 500 telephone enquiries. The article by Paul Bibby identified that, “the average weekly rent for a two-bedroom apartment in Sydney’s inner suburbs rose by $20 to $430 during the June quarter – a new record – while the average rent for the Sydney metropolitan area increased by $10 to $330.”

So what brought this crisis on – look no further than retired Premier Bobby “Dazzler” Carr whose government introduced the now failed and removed Vendor Exit Tax which was introduced in the May 2004 mini-budget. This tax is today the smoking gun for our rental crisis. On April 16 2004 Quentin Dempster on Stateline, “Killing The Goose” stated “ Extending land tax to all investment properties and imposing a 2.25 per cent vendor stamp duty on sales is being condemned by property and superannuation investment industries. It’s said the changes are counter- productive and will drive investment out of NSW, in particular, to Queensland.” Not only with the benefit of hindsight was this statement proven to be correct this tax also resulted in a mass exodus of our building workforce who also went North, (and stayed) in pursuit of a better lifestyle. In this interview Dempster interviewed Peter Verwer, CEO, Property Council who stated, “Mr Egan (he was that little bloke who retired to go fishing – the one Peter Costello tapped on his head) has just taken more money out of the pockets of those who are supplying accommodation and 80 per cent of all rented accommodation is supplied by the private sector.”

Vendor Exit Tax destroyed NSW rental markets that have never recovered – and it did not even come close to realising expected tax revenues. A complete failure, as this tax should never have been introduced in the first place. Today, the rental markets are paying the price for this government decision. The ministers have moved on but their legacy lingers in today’s markets – the price of erroneous portfolio management.

Now let me add some greater perspective to this point in time. The Carr government had been absolutely hammering those investors who represented the 80 per cent of rental ownership at that particular time. Investors were already departing a market in which they had no faith. Please note that this was 4 years after GST was introduced on the platform that state taxes would be reduced. Now the scary truth clearly identifies how this elected government can send so many families to the wall. Peter Verwer then went on to say “ The Government hasn’t looked closely at the numbers. Vacancies for rented accommodation are already falling and have for the last 18 months. In fact, they’ve fallen from 5.5 per cent to 3.5 per cent”. Today, vacancy rates sit at 1.5 per cent !! The vast majority of those investors who consumed 80 per cent of the rental investment market transferred their funds to the stock market – a fact. Sydney rental markets have been under 2 per cent for twelve consecutive months when in June a record low of 1.3 per cent was recorded. One needs to ask the question, how can a state government take vacancy rates from 5.5 per cent to 1.5 per cent without the word incompetence entering the equation? When vacancy rates were around 3 per cent, landlords would offer prospective tenants a rent free period to entice them.

Little wonder a recent survey conducted by www.realestate.com.au identified that about one in three Australians rent and showed that 89 per cent of renters reported experiencing “negative psychological effects” directly related to rental climate. All that lies ahead for those in rental properties is annual rental increases that explain why investors are moving back to these markets. It will take many years for vacancy rates to reach 5.00 per cent.

On the flip side, in August 2007, Kevin Rudd announced that if elected, rents would be cheaper under a Labor government. They have a plan to create 50,000 more affordable homes. Well “Kev- 07”, building approvals fell 1.7 per cent in August 2007. Dwelling starts in Australia are running steady at 150,993 although this is below the underlying demand of 175,000 dwellings required. NSW has now dropped to 29,315 (the fourth successive fall) a fall of 8.5 per cent which left building starts 40 per cent below the level set in 2003. This was around the time the building industry started evacuating NSW and headed North to Queensland.

In 2006, NSW had 34,345 building starts, 41,505 in 2005, and between 51,000 and 52,000 in 2002, 2003 and 2004. The song “Hit the road Jack – and don’t you come back” resonates well with our building industry in NSW.

Fear not. Under our state government regime it will cost you $795.00 (Plus G.S.T) to install a tow bar on your four wheel drive. eBay has some great deals currently on their Millard caravan range. You may however, have to transport it to Queensland to find a tradesperson who will transform your new mode of accommodation – yes vinyl is on the way back. So too, is the Sunday family dinner with the Chicko Roll – just hold the balsamic dressing !! Cheers ^__^

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