Rentals in a Tight Spot

PROPERTY TALK

Rental supply is not keeping up with demand – and investors are holding off

The Cairns rental market is tight and facing rising rents – which is the worst possible time to remove investors from the market and diminish the supply of rental properties.

We’ve faced a tight rental market for quite some time. In fact, the last time we were not a tight rental market was 2015. A rental market is considered tight when the amount of vacant properties falls below 2.5 per cent. It’s healthy between 2.5 per cent and 3.5 per cent and when the proportion of vacancies rises above 3.5 per cent, it is a weak market.

Comparing the March 2019 rental markets with the March 2018 markets, 53 per cent of our rental markets were classified as tight in 2018, but in 2019 that jumped to 63 per cent. This indicates supply is not keeping pace with demand in a state known to be one of the highest rental states in the country.

This is true of the Cairns rental market and we need additional supply. But the proposed changes to negative gearing are designed to remove incentives for landlords and diminish the supply to the rental market.

This could potentially be disastrous for parts of our rental market. The Labor Party’s policy is – by their own admission – specifically designed to remove investors from the established housing market.

This couldn’t happen at a worse time. We need incentives that will bring new investors to the market, not disincentivise them.

Renters will face the brunt of the impact. Rents are already rising due to tightened conditions in many markets and the consequence of the proposed changes to the negative gearing policy will likely be to amplify those rises in some markets.

Analysing 32 rental markets, the REIQ found that 17 of those were tight in the March quarter of 2018. This grew to 20 markets just 12 months later, in March 2019.

In March 2018 there were eight healthy markets, that grew to nine in 2019. The greatest change came in the weak markets. Seven markets were classified as weak in March 2018 (vacancies greater than 3.5 per cent) and a year later, that fell to just three markets.

In Queensland, 34 per cent of us rent our home and with continued population growth, we clearly need additional supply.

Tom Quaid is the REIQ Far North Zone chairman