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Opposing calls to place restrictions on landlords, Ripehouse Advisory CEO Jacob Field said it will only make a bad situation worse.
The restrictions would limit their capacity to increase rents, as many claim renters are being pushed out of homes by greedy landlords.
Field said the reason why rents are increasing beyond the reach of many tenants is due to a severe shortage in rental stock, made worse by moves from APRA.
He believes APRA has gone too far and with banks being extremely conservative after the Royal Commission, investors have been prevented from purchasing investment properties because they simply can’t get finance.
He said, “The underlying reason why landlords are increasing their rents is in a bid to meet current lending specifications.
“Not only are banks increasing LVR requirements, but they are also are forcing minimum serviceability for new property purchases and refinances.”
Field said banks are continuing to change the goal posts for investors. A recent client who had pre-approval in place with an 80% LVR found that when it actually came time to purchase the lender reduced it down to 60%.
“What’s more, the bank then included an additional serviceability requirement, insisting that the investment have a minimum of 4.8% yield,” Field said.
He suggested that if it wasn’t for this pressure coming from financial institutions, landlords might not be so aggressive in pushing their rents up.
He added, “In the first instance, banks are forcing investors to purchase high yielding properties and then when they are looking to refinance there is pressure on them to continue pushing up their rents to achieve these minimum yields.”
Field said there was additional stress being placed on the rental market, pushing it to crisis point by the tenants themselves.
“Tenants are putting upward pressure on rent, because of the severe shortage of properties available,” he explained.
Field notes as an example there are currently fewer than 100 property available for rent in the entire capital city of Hobart.
“In these markets, there are so many renters falling over themselves to lease the few properties available, the balance of supply and demand is critically out of whack,” he said.
Ultimately Field believes that curtailing landlords ability to increase rents is not the solution, but instead, we need to encourage greater investment within the community.
“If we try to limit rental increases in this way, it will mean fewer landlords in the market and a further decrease in the number of rental properties available to rent.
“The way to put a brake on rental increases is not through artificial restraints. The fix lies in helping landlords viably put lower yielding properties into the market, by lifting current lending restrictions,” he said.
