Many Australian property investors have struggled to keep pace with increasing mortgage repayments and are still very concerned about what financially lies ahead for them with as the interest rate landscape remains unsettled.
When the Property Investors Council of Australia (PICA) surveyed members recently, a good number outlined their increasingly precarious financial situation and indicated that introducing a rent cap would be a worry.
Bodies like PICA are concerned that strategies like freezing and capping rents will only reduce investor demand and rental housing supply.
In March this year the Queensland Government announced a cap to rental price increases of once per year, which the state in line with the likes of Victoria, New South Wales, South Australia and Tasmania. The ACT has a cap on rent increases that limits them to no more than ten per cent above the Consumer Price Index for Canberra.
Rent control policies have been implemented in various forms around the world. For instance, in Germany, where more than half of the households rent, price control policies of some form have existed since the 1920s. The current policy was introduced in 2015 and rules that the rent for a property cannot be more than ten per cent higher than the local market rate, which is set out in an index.
Other countries such as Ireland, Scotland and Spain cap rent increases in certain locations where there are tight markets. Most Canadian provinces set the annual percentage that rents can be increased that year. In New York, a rent control policy was introduced in 1943 in response to a housing shortage during the second world war, and there are still some homes locked into historical rent prices.
Over the past year, some property investors have seen repayments on a $500,000 mortgage rise by more than $800 per month while in the same period, average monthly rental prices have risen by $290.
Most landlords are fair not greedy. Many reward good tenants who look after their property by not raising rents unrealistically. Some even give a discount to market rate as a show of good faith for being great tenants.
The housing crisis is a complex issue with no easy solutions. When you are a landlord, it’s important to keep up to date with changes in the rental market to ensure your property is priced correctly for supply to meet demand.
If outgoings on your investment property are causing you angst, initiate a conversation with your property manager. If mortgage repayments are a real concern, your property manager can introduce you to finance specialist who might help with refinancing.