Low vacancy rates have been reported in all capital cities except Darwin in the December quarter 2005 edition of the Mortgage Choice/Real Estate Institute of Australia Real Estate Market Facts. This is further evidence of the tightening of the rental market.
For the last twelve months, vacancy rates have ranged between 1.4% and 2.8% across all capital cities. Because of this, rents are also on the increase. Over the past twelve months, rent increases have ranged from 3.3% in Canberra (currently the highest median weekly rent for a 3 bedroom home in Australia at $310) to 21.0% in Perth. Rents for two bedroom units, apartments and townhouses also increased significantly over the year, ranging from a 3.4% increase in Sydney (currently the highest median weekly rent in Australia at $300) to a 29.0% increase in Perth.
"The activities of investors, including those who used negative gearing, added significantly to the supply of dwellings for rent in most capital cities from 2001 to 2004," said REIA President Tony Brasier.
"However, in the last twelve months, as the demand to buy property has softened, the demand to rent property has increased substantially which has driven vacancy rates to low levels.
"Some market commentators have called for negative gearing to be abolished or substantially altered. This was tried in 1985 with such obvious and disastrous consequences for the property market and for people trying to rent that negative gearing was reinstated in 1987. This should not be forgotten.
"In 2003, the Federal Treasurer, the Hon. Peter Costello MP, observed that during the change to negative gearing, "...rents rose across Australia by 37 per cent. During that period, the average rent for a three bedroom house in Sydney rose by 57.5 per cent. So the one thing we know is that changing tax treatment to work against investor housing – whatever the effect it has on house prices – most certainly works against renters."
"Recently, vacancy rates have been decreasing as property prices decreased – with negative gearing in place! I expect there will be upward pressure on rents. This is occurring in a stable property market which includes negative gearing and capital gains tax concessions.
"The notion of abolishing negative gearing or concessions to capital gains tax would be tantamount to sabotage of the rental market. Inevitably, the major outcomes would be a dwindling supply of rental properties and rapidly escalating rents.
"In March 2005, the Prime Minister stated that the Government has repeatedly resisted a call to remove negative gearing because it would be counter productive. He said, "I couldn't think of anything more calculated to discourage investment in housing of a cheaper variety and which is available for rental".
"The evidence is proof. Renting can be difficult. Those having trouble finding somewhere affordable, indeed, anywhere, to rent today will certainly not welcome any changes to negative gearing," concludes Tony Brasier, REIA President.
