Proposed rent cap the last nail in the coffin for investors

As investors flee the real estate market due to compounding regulation and talk of a proposed rent cap that is sending jitters through the markets, many in the industry are shaking their heads over this proposed recklessness.

Government interference in the rental and property free market has rarely produced any long-term benefits, and in many cases, can make the situation worse.

Many home owners who provide rental accommodation are mum and dad investors who have the same battle to stay afloat as the rest of us.

With increasing regulation and controls being forced onto them, and now this proposed rent cap nonsense being considered, many will just throw up their hands and get out.

And now Victoria’s real estate peak body has had enough of bureaucracy gone mad and is digging their heals in on this matter.

The Real Estate Institute of Victoria has launched a major advertising campaign attacking the proposed residential rental cap, outlining how the policy’s introduction will increase homelessness.

The Victorian-wide print, digital, editorial, and social media campaign, backed by industry, states while a rent freeze might save renters some money in the short term, it could actually cost them a place to live.

Citing failed attempts of introducing rent caps in Stockholm, New York, Berlin, and San Francisco, the REIV suggests that a better approach would be to create policy that incentivises increased housing supply.

The advertisement states “Rent freezes are a naïve view of the wider economy and rising rents are a symptom of a problem, not the problem itself, the real problem is lack of supply”.

Real Estate Institute of Victoria (REIV) chief executive officer Quentin Kilian said with Victorian vacancy rates already under two per cent, any reduction in supply would make matters worse for renters.

“Thousands of rental providers are selling up their investment properties to get out of a market that is far too regulated, taxed and tinkered with, 90 per cent of REIV embers have already reported an increase in sales appraisals from their landlord clients.

“To add another shortsighted, ill-considered condition, such as a rent cap, is just reckless – it will without doubt increase homelessness as more investors leave the market and could possibly harbour a black market rental sector.”

The REA Group data for metro Melbourne (July 2023) shows new rental listings are down nine per cent year on year, the lowest since 2010.

The REIV has outlined other concerns, including:

Housing quality being compromised as rental providers are unable to spend on maintenance while keeping rental income frozen

The rent cap policy is not means tested, overseas experience shows that this can lead to current renters refusing to move even if they can afford to, making the property unavailable to someone in need, and

Likelihood of the emergence of a black market of sub-renting, where tenants may sub-let at soaring costs, as rental caps only apply to property owners and are not applicable to current tenants.

Mr Kilian said following the Victorian government’s failure to engage industry, his organisation had to act.

“As the peak body of a sector that employs more than 15,000 people who in turn support millions of renters and hundreds of thousands of mum-and-dad investors, we are flabbergasted by the consideration being given to such destructive policy.

“We were compelled to take affirmative action and inform Victorians of the disastrous impacts of such a decision.

“We hope the campaign helps educate all property participants and ensures that all sides of politics listen to experts in the field.

“Maybe then Victoria will see some thought-through policy that has a positive impact on housing affordability.”