this post was submitted on 06 Nov 2023
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That's the thing - as soon as the interest rates go down to the point where it becomes profitable to rent out a property again, it will open up competition as more landlords are drawn to the market and the additional rentals compete for tenants.
But fixing rents just makes landlords like me want to exit the market completely, which is what I am working towards now. Next year when my tenants' leases are up they will unfortunately have to find somewhere else to live because I just cannot afford to keep subsidising their rent any longer - well over half my salary is going to the bank on top of 100% of the rent they pay me, which is not sustainable for me. I have to sell them on my own terms before I default on my loan repayments and the bank sells the rentals for me.
Most landlords I speak to are in the same boat. The more talk about rent freezes the more of them want to exit the market before they get trapped. And it has already started happening which is why rents continue to go up - the same number of tenants are competing for a smaller and smaller number of rentals, and it's only going to get worse. I think I need to sell now before the next bright spark comes along and says hey let's make it illegal for landlords to sell their rentals...
I think if you're a tenant and you think a rent freeze is a good idea, you're just shooting yourself in the foot. The real issue is the rise in interest rates, because some of that is what's getting passed on to you in the rent increases. Lower the interest rates again and rents will drop. The problem is it's so slow - it has taken this long for the rate increases to get passed on to tenants, so if they lower the rates again it will take just as long for rents to drop. I don't envy anyone renting at the moment, but blaming and penalising landlords when the banks are giving them no choice is misguided at best and will only make the problem worse.
If you haven't read the stuff coming out of the Reserve Bank it's pretty sobering. They are aiming for a certain number of unemployed, homeless people because that's how they plan to keep inflation low. So even the idea of a rent freeze is doing the opposite of what the Reserve Bank is trying to do, which is to get enough people to lose their jobs and homes so that they can't spend as much money, thus lowering inflation. I find it amazing that they are doing that and yet people blame landlords, the ones who actually go to the effort of making a rental available and subsidise some of the rent out of their own income. Talk about aiming at the wrong target.
You know when a landlord sells a house someone typically lives in it right
Yes but if it's someone moving up from interstate or a young adult moving out of their parents' home, then it's still one less property available for rent than before, with the same number of renters looking for somewhere to live, which was my point.
There are thousands of people every week moving into QLD from interstate, and far fewer leaving. All those people have to live somewhere, and if they buy up all the rentals that are being sold so they can live in them themselves, where are those renters going to live?
Exit the market completely...and do what? Not rent the home out at all? Well, for starters, that would mean you're leaving way more money on the table than you would be if you kept renting it out at a reasonable rate. But even besides that, the policy advertised here is in addition to Sriranganathan's pre-existing policy of increased rates on unoccupied homes.
And sell it? Well, the new owner is going to be one of: a first-time home-owner, a moving home-owner, or a different investor. In the first case, that's someone who is no longer renting, so the difference between the number of homes available and the number of renters remains the same. In the last case, that new investor is going to be renting it out, something the old owner was apparently unwilling to do. So it's completely neutral. If it's a moving home-owner, their old home is being bought by someone else, which takes us back to the top of this paragraph.
This part is just completely wrong. It displays a severe lack of critical thinking on the part of the many people who are saying things like it. It's like they think that landlords are actually providing the service of providing housing. When really, the service provided by landlords is merely maintenance of existing housing.
Will they? I've never seen it happen. At best, lower interest rates might lower the rate at which they continue to rise. But as you already know (since you did watch the video before commenting on it...right?), many landlords are increasing rent at much higher than the rate that interest rates have risen, so that argument really doesn't hold much water.
For sure, the tack taken by the RBA is gross, and they need a new model that considers the effect on the actual people, rather than merely robotically applying economic theory from the 1980s. But there are a lot of problems with the economy which are being exposed at the moment, and trying to play these "but whatabout..." games when people are focusing on one area only serves to undermine progress.
Well at the moment most landlords I have spoken to (the ones with loans) are losing more money by renting out the property than they ever have before. You only leave money on the table if house prices increase, and despite what you see in the media, many house prices have not risen that much. My own have only recently returned to what they were worth back in 2008 before the GFC, but in that time I have spent many thousands on interest payments to the bank so if I sell today I won't break even and will make an overall loss, as compared to leaving the money in a normal bank account the whole time. I am hoping that by next year when the leases expire the house prices will have gone up enough that I can at least break even and recover the extra money I paid to the bank. So I'm not sure what you mean by all the money left on the table, unless I am missing something?
The property sale is unlikely to be going to another investor given current market conditions, so it will be removed from the rental pool. Yes you're right that it will go to another person, but this is likely to be someone moving out from their parents' home, or someone coming in from interstate. It's unlikely to be a renter purchasing the home because if a renter was going to buy a home they would have done so already, or they're still saving for a deposit and the price increases have set them back so they have to keep saving for longer now.
It's odd to say that landlords aren't providing housing, when a new investor in the market will provide an additional rental that was not available before. Yes it might be an existing house instead of building a new one, but we're talking about rentals not about buying. When we need more rentals available it doesn't matter whether they are existing houses or new ones. We only need new houses when we're talking about lowering the price of buying a house.
The fact is that landlords aren't increasing rents faster than interest rates, it's misleading the way it's calculated. The interest rates have been increasing every month or two for a while now, but due to most leases being a fixed length, the rent can't be changed. So of course once the lease gets renewed there is a correction and six months or even a year of interest rate increases suddenly get included in a single new lease, and so of course that looks like the rent is being increased at a much higher rate because of the sudden jump. But if you look at it percentage wise over the whole time period, you'll find that the majority of rents (at least outside major cities) are increasing at or under the interest rate. In my own case I have increased my rents way under the interest rate which is why I'm now stuck for the next six months having to dig into my savings to make my loan repayments. But hey at least my tenants are keeping VERY quiet about maintenance issues as I think they realise they're getting a pretty good deal, so at least they are helping me save some money there.
At any rate, time will tell which one of us is right. I am sure rents are going to continue to rise as the number of landlords decreases, but if that does not happen I am more than willing to admit I was wrong. We'll see!
You're completely delusional. Understandable, because you're invested in the delusion. The pun is free of charge. No need to pay rent on it.
The RBA's cash rate had been abnormally low, near zero, for a long time. It was abberant. I'm sure there's a reason it had been like that, and I'm sure that reasoning involved lots of America. But you people need to understand it was not, and is not, normal. It's not going back down. (At least not until the Americans drag it down again.)
The residential investor class in Australia is largely made up of amateurs being sold on hype and ideas of free money. "Stack your mortgages up on top of each other and get tennants to pay it off for you, plus profits!" The whole sector is full of jokers. And they kept on rolling in, inflating the price of housing with the banks' eagerness to finance speculation with ever cheaper money.
"But some people just won't be able to afford to buy. We're providing housing. If the big meanie banks make our loans cheaper we'll lower your rents. Pinky promise. :("
Use some logic, please, I beg of you, to at least present as a more sympathetic victim if nothing else. Why was the price of housing and rentals not going down when money was gradually getting cheaper? We've had your scenario play out already, and housing got more expensive.
Secondly, that's the banks role, not yours (to provide housing to those that can't afford the immediate outlay, in a round about way): to bring forward future expenditure. You know, to loan money. It's meant to be good for the economy.
Your role, as a landlord, is that of a parasite. Sorry, there's no glorious role here for your lot within the larger economy. From Adam Smith in the 18th century, to Henry George in the 19th, to who the fuck knows who in the 20th, to the unemployed, couchsurfer Brian in the 21st: landlords have not been seen as productive to the economy. Bearable, and injurious when too large. Never welcome. In Australia, their collective cries of "woe is me" is just... sad. A touch of pathetic, but mainly a deep sadness. A country that thought it could make nothing, and just perpetually rent out and/or flog stolen commodities.
Australia, you have a big problem. It's been decades in the making. I wish the federal government would be more visionary and lead in nation building. Its citizens don't have a fucking clue.
Article with a brief explanation of what's happening to the world's economies and potential outlooks: https://www.mckinsey.com/mgi/overview/the-future-of-wealth-and-growth-hangs-in-the-balance#four-scenarios . No, the banks nor the RBA are out to make you homeless ffs.