I've been consistent on this point (often wrong, but never in doubt!): taxes in the Australian Capital Territory (ACT) are far too high for landlords to invest there en masse, which will lead to a rental shortage as the population steadily grows.
There are a lot of 'well, in theory...' type comments made about this point, however, including by me, so let's stick to the hard data for today.
Rental vacancy rates fell from 2½ per cent in 2014 when rate rises were first introduced to 0.6 per cent in October 2018.
Rental markets are seasonal in the ACT and often tighten through the early months of the calendar year, and in turn Canberra could take out Hobart in Tasmania for title of most undersupplied capital city rental market in 2019, which is is some feat (click to expand):
Asking rents for houses in Canberra are now up by more than 26 per cent over the past three years alone.
A major issue is that rates are often far too high on units as well, despite the relatively low land value content of this property type.
The asking rent for 2-bedroom units in Canberra is also up by more than 23 per cent over the same time period!
In Canberra!
Source: SQM Research
If you don't like asking rents - and you may not - then Domain's actual rental report figures this week were similar.
Domain reported that Canberra is now a more expensive city in which to rent a home than even Sydney, with rents spiralling as high as the Black Mountain Tower.
Domain reported that Canberra is now a more expensive city in which to rent a home than even Sydney, with rents spiralling as high as the Black Mountain Tower.
Dr. Nicola Powell:
"With investors slugged with higher rates and land taxes, it is likely landlords are passing on the additional costs to tenants, or opting for high yielding short-term leases in order to recover costs."
On the plus side there have been some significant apartment projects approved for construction, but one questions which landlords are going to buy them and rent them out.
Politicians seeking tax deductions, perhaps.
Foreign investors won't supply the rentals any longer, having already been taxed out of the market.
Foreign investors won't supply the rentals any longer, having already been taxed out of the market.
Some people are even campaigning for high land taxes, and the ALP negative gearing reforms, and a doubling of capital gains tax (all of this on top of the changes made to foreign investment, interest-only lending, restrictions on Division 40 depreciation, disallowance of travel expenses etc etc.).
There's nothing much to say but best of luck with that!
It's a small city, which grows in population by less than 10,000 per annum. Way to go!
PETE WARGENT is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and blogger.
