But fixing rents just makes landlords like me want to exit the market completely
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.
the same number of tenants are competing for a smaller and smaller number of rentals
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.
Lower the interest rates again and rents will drop
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!
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!