National cap on rent increases would be "economic lunacy," peak body says
The Real Estate Institute of Queensland has strongly criticised the federal government's proposal to impose national caps on rent increases, arguing that it is “economic lunacy.”
REIQ CEO Antonia Mercorella expressed concerns about the potential strain on both landlords and tenants and urged state and territory governments to consider the broader economic context before making any decisions.
“We understand the community concern about rents rising at a much faster pace than we have historically experienced,” said Antonia Mercorella, CEO of REIQ. “In the decade prior to the pandemic, when we had healthier levels of supply, we all grew accustomed to gradual increases in rent, with the data showing periods of stagnant rates.”
However, Mercorella said the underlying issue driving rent increases was gross undersupply. She said it was vital that government avoid restricting the rights of property owners who provide the majority of rental supply.
“A two-year cap on rent increases would significantly limit property owner’s ability to recoup rising holding costs and potentially makes keeping the property unsustainable,” Mercorella said. “Many assume that because rents are going up, investors are ‘exploiting’ the market, but the reality is property ownership costs are growing at a much faster pace than rents. It’s disappointing when Governments seem to have no understanding of the commercial realities of holding an investment property and the shaky ground that the typical mum and dad investor mindset rests upon.”
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While acknowledging the critical undersupply issue, Mercorella said that rent increases are beginning to stabilise.
“This would indicate that it’s not the time to act recklessly and risk driving away property investment, reducing rental supply, and stifling housing development that caters to investors and relies on their interest to get off the ground,” she said.
Mercorella also expressed disappointment with recent legislative intervention in Queensland, where rent increase frequency was already revised and capped to once per year. She warned of the potential negative consequences of “rushed and ill-considered” policies, stressing the importance of carefully evaluating the implications before implementing any changes.
Mercorella criticised the National Cabinet's involvement in the issue, stating that rental policy falls under the jurisdiction of state and territory governments.
“Ultimately, it is up to state and territory governments to decide and we trust they can see this is a veiled attempt from the federal government to appease the Greens and distract from the blocked housing fund,” she said.
REIQ’s view falls in line with that of Reserve Bank governor Philip Lowe, who recently warned Parliament against implementing stricter controls on landlords.
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