With the impending change to the capital gains tax and negative gearing already phased out for buyers of established properties, Prime Minister Anthony Albanese doesn’t appear to be the best friend of property investors. But they should be thanking him.
Capital city housing prices now down more than 2 per cent from their peak, and ever more economists and market experts predicting much further falls. But any ire directed at the government by property investors is misplaced.
When you take a step back and look at the actions of the Albanese government across the entirety of its more than four years in power, a clear picture emerges.
By effectively choosing to run a level of migration that the federal government’s own agency, the National Housing Supply and Affordability Council, believes has created a massive housing deficit, the Albanese government has arguably been property investors’ best friend in government.
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A uniquely Australian rental crisis
In Australia, the rental crisis is now approaching its fifth anniversary of vacancy rates at ‘crisis’ levels and asking rents are still rising in real terms.
According to property data provider SQM Research, as Australia closed out the 2010s, the rental vacancy rate nationally was 2.8 per cent, far above the 1.3 per cent it sits at today. Even after accounting for potential issues with seasonality, the rental vacancy rate at this time in 2019 was 76.9 per cent higher than it is today.
This has occurred despite the fact Australia has enjoyed the highest level of per capita dwelling completions of any major Anglosphere nation for the 37th straight year.
In the US, by mid-2022, the rental vacancy rate was rising back toward pre-Covid norms and was back in the range of normal outcomes by the end of the first quarter of 2023.
Vacancy rates in Australia have stayed very low since the pandemic. · Yahoo Finance
Since the Albanese government came to power in May 2022, the divergence in rental growth between Australia and many of its Anglosphere peers has been significant.
In Australia, data from SQM Research reveals that asking rents have risen by 39.0 per cent since the current government came to power.
In second place with the next strongest rental growth is the United States, with total growth of 13.1 per cent.
In third, we have New Zealand, where asking rents have grown by 7.8 per cent, followed by Canada where rents are up by 7.6 per cent.
Story continues
Australia has certainly stood out. · Yahoo Finance The $157 per week difference
But what if a different path was chosen by the Albanese government, one where Australian rents tracked the performance of national markets in Canada, New Zealand or the US?
When the government came to power in May 2022, dwelling rents at a national level were $501.70 per week.
As of the latest monthly report from SQM, the figure for the same metric is now $697.40 per week.
If Australian rents had of tracked the path of their Canadian counterparts since the election of the Albanese government, the asking rent on the median dwelling would be $157.80 per week cheaper at $539.70.
If they followed the path of the US, they would be $129.90 cheaper at $539.70 per week.
And if they followed the path taken by the rental market of New Zealand, they would be $156.50 a week cheaper at $541.0 per week.
What could’ve been. · Yahoo Finance The takeaway
While rental market outcomes vary dramatically from nation to nation, Australia stands alone atop the pile for rental price growth by a substantial margin.
The Albanese government has helped deliver a windfall to the nation’s property investors that has effectively offered a bailout to those hit by rising costs and rising interest rates.
That continues to this day, with dwelling rents up by over 8 per cent in the last 12 months, compared with flat rents in New Zealand, falling rents in Canada and 2.2 per cent rental inflation in the United States.
Without the 39 per cent rise in asking rents since the government first came to power, significantly more property investors would have ended up in financial difficulty and there would have been much less incentive for investors to get into the market in recent years.
In reality, they were delivered the largest rise in asking rents in decades since the pandemic began and a rental crisis that continues to give landlords strong leverage to continue to push up rents to this day.
The relationship may have now soured, but just a few months ago Anthony Albanese was the greatest friend in the Lodge that a landlord could have possibly asked for.
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