Calls for rent freeze as grim warning handed down
Economists have warned the government’s controversial property tax overhaul could send rents surging by 30 per cent, prompting fresh calls for a rent freeze.
The federal government announced it would cut the capital gains tax discount and repeal negative gearing for new builds, leaving investors to pay more tax when selling a property.
There are fears rental prices could soar after the government overhauled property taxation in this year’s budget. Nine
Although the changes were designed to make it easier for younger people to enter the housing market, there are concerns it could have a negative, short-term impact on the cost of rentals as landlords look to cover for the tax discounts they will lose.
There are also fears that prices would rise as rental yields increase. Rental yield is the money landlords make from rent and shows as a percentage of the property price.
“The changes to the tax settings for investors in existing dwellings imply that gross rental yields will need to rise in order to compensate for the loss of tax benefits,” said Gareth Spence, NAB’s head of Australian economics.
“For investment properties in Sydney and Melbourne, a rise in the rental yield of 1 per cent (from around 3.5 per cent) to around 4.5 per cent implies an increase in rents of 25 per cent to 30 per cent, assuming the current level of house prices is unchanged.”
Treasurer Jim Chalmers poured cold water on the scenario. Alex Ellinghausen
Spence clarified that this modelling was only one potential scenario that could occur as a result of the property tax overhaul, and was not an official forecast.
Treasurer Jim Chalmers made the same point when he was quizzed on the issue on Tuesday.
“It’s not a forecast of what they expect to see will happen with rents over the next little while, and it doesn’t take into consideration a whole range of factors, whether it’s the grandfathering in the design of our policy, whether it’s developments in the housing market or in the economy more broadly,” Chalmers told Today.
“The NAB note … acknowledges that it doesn’t take a lot of those things into consideration, and so it’s not a forecast for what they expect to see happen with rents.”
But shadow treasurer Tim Wilson took an alternative view of the findings.
“The Albanese government’s budget was explicitly designed to increase rents through higher taxes”, Wilson said in a statement on Tuesday.
Shadow treasurer Tim Wilson claimed the government wants rents to go up. Dominic Lorrimer
“Now the Albanese government are denying their budget dream isn’t coming true”.
Greens leader Larissa Waters called on the government to implement rent freezes to protect renters from soaring costs.
“Renters need protection,” she told Today.
“We need a rent freeze nationally.
“It’s important that we help renters have secure housing … you shouldn’t be allowed to increase rents over and over and over. We need to make those unlimited rate rises illegal.”
In every state and territory except the Northern Territory, landlords can only raise rents once every 12 months and must give between 60 and 90 days written notice.
NSW Opposition Leader Kelli Sloane said such a measure was impractical and would punish fair and reasonable landlords.
“You can’t control mum and dad investors and tell them, ‘Don’t put your rents up when interest rates are rising,’ that just doesn’t work,” she told Today.
“I know a lot of good landlords who keep their rents stable, and even cop a loss, because they appreciate good renters, secure renters, long-term renters.”
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