One of Australia’s biggest banks has warned rents are tipped to soar by almost 30 per cent within two years after the Albanese government’s tax changes.
NAB has advised that landlords will need a higher yield to cover the capital gains tax discount and negative gearing changes announced in May’s Federal Budget.
‘In our view, the changes to the tax settings for investors in existing dwellings imply that gross rental yields will need to rise in order to compensate for the loss of tax benefits,’ Head of Australian Economics Gareth Spence wrote in a note to clients.
‘For investment properties in Sydney and Melbourne, a rise in the rental yield of 1 percentage point from about 3.5 per cent to around 4.5 per cent implies an increase in rents of 25 to 30 per cent, assuming the current level of house prices is unchanged.’
Treasury estimated that the tax changes would increase rents by just $2 a week in this year’s budget.
However, property analytics company SQM Research’s Louis Christopher said rents could rise by between 15 and 30 per cent as investors looked to recover income lost under the tax changes.
‘We estimate between a 1 to 1.5-percentage-point increase in the yield would be needed to compensate investors, and that equates to about 30 per cent increase in rents,’ he said.
‘Even if the impact of the tax changes is shared between lower house prices and higher rents, that would mean about 15 per cent increase.
Rents are tipped to soar by almost a third within two years after the Albanese government abolished property tax concessions, one of Australia’s biggest banks has warned
‘That’s going to be a significant input to inflation given rents are such a major component of the consumer price index.’
In Queensland, property developer and manager David Laverty said rents had already increased by 10 per cent and predicted further rises.
‘It’s 10 per cent straight away,’ he said.
‘I think they are rocketing by more than people realise especially in southeast Queensland where there is low vacancy.
‘But I think you will see a delay in the data given the rules here on when you can legally adjust the rent.’
In May, the Albanese government removed negative gearing from existing builds and also removed the 50 per cent capital gains tax discount, replacing it with a tax minimum 30 per cent tax indexed to inflation.
Domain’s latest House Price Report found national capital city house prices fell 1.4 per cent in the June quarter, while combined capital city dwelling prices fell 1.3 per cent.
Sydney house prices dropped 2.9 per cent and Melbourne prices fell 2.5 per cent over the quarter, marking the first broad downturn in more than three years.
NAB has advised that landlords will need a higher yield to cover the capital gains tax discount and negative gearing changes announced in May’s Federal Budget
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Housing Minister Clare O’Neil argued the cooling market was helping first-home buyers gain a foothold.
She pointed to a recent sale in Melbourne’s Footscray, where a two-bedroom house sold for $817,000 after being passed in at auction.
The property’s reserve was set higher, at $835,000, before negotiations secured a deal with a young couple purchasing their first home.
‘The real estate agent said there was a bit of emotion when the vendors and the buyers met post auction, as the vendors had bought that as their first home, and they were handing it to a young couple who were after their first home,’ O’Neil said.
‘There are a lot of buyers around that are first home buyers, they are the ones that are still moving in a timely manner,’ the agent said.
