One of Australia’s most experienced property investment figures says that recent initiatives outlined by the Federal and state governments to address the current housing crisis will only make things worse.
Terry Ryder says the measures show governments have no real understanding of how the nation’s property market actually works.
He’s castigated state governments like Queensland, New South Wales and Victoria for imposing rent freezes and charging investors additional fees and levies.
It “will not help provide more rental properties,” he says, “In fact, it will significantly reduce the rental pool.”
Who is Terry Ryder?
Terry Ryder has spent more than 40 years specialising in property investment.
He’s written four books on real estate, appears on radio, TV, and podcasts, and regularly pens articles for property journals, magazines, and websites.
Around 20 years ago, he founded “Hotspotting”—a property data analytics firm for real estate investors.
The bottom line is that Terry Ryder knows property investment like the back of his hand, so when he speaks, it’s worth listening.
Terry’s take
In a recent editorial in Australian Property Investor magazine, Terry Ryder let fly:
“In recent weeks, we’ve had the Federal Budget and state and territory budgets handed down, and there’s not a single measure in any of them that deals with the high cost of building and buying houses or with the chronic shortage of rental properties causing residential rents to rise and rise,” he writes.
“There are numerous measures, though, which, directly and indirectly, make those core housing issues worse.”
Mr Ryder points out that no matter how many social and public homes governments promise to build in the future, there have been no measures to help private landlords, who provide the overwhelming bulk of rental accommodation.
“There has not been a single measure to provide encouragement or incentives to the people who provide more than 90 per cent of the homes people rent—private mum-and-dad investors,” he says.
“What there has been, notably in the state budgets from the governments of New South Wales and Victoria, and in other policies they have announced, is a series of measures that increase the costs on the people who provide the product that’s in short supply, particularly with new or increased taxes.”
“Victoria has exacerbated the problem by introducing new requirements on the standard of the dwellings that will force owners to spend between $5,000 and $10,000 on upgrades,” Mr Ryder says.
“As a result, for many investors, holding onto their properties is no longer financially viable, so they are selling up, reducing the potential rental pool even further.”
Mr Ryder quotes figures that claim more than 3,000 property investors sold their Melbourne properties in May alone, while across Victoria, almost 4,000 rental properties are listed for sale.
He says this is also starting to happen in New South Wales “with thousands of investor-owned properties currently listed for sale.”
“The state budget in New South Wales includes significant increases in land tax and a major Emergency Services Levy burden on property owners,” Mr Ryder says, while, “Queensland’s budget has introduced a renter relief package, but there was nothing to increase the supply of rental properties and reduce the cost of building new homes.”
Much of the blame for poor rates of construction in Australia—particularly of large apartments blocks in “in-fill” urban areas close to CBDs, public transport and other infrastructure—has been sheeted home to supposedly “NIMBY” local councils blocking developments or imposing onerous conditions and extra costs.
But Terry Ryder says they are not the main culprits.
“The high cost of building new homes, whether they be houses or townhouses or apartments, has been largely, though not entirely, caused by imposts from various levels of government, including local councils, but in particular by state governments,” he says.
“The rental shortage has been created by years of politicians discouraging, demonising and disincentivising investors, and they continue to make the situation worse for tenants with ongoing measures that punish investors and exacerbate the shortage.”
The take-out
Terry Ryder is dead right when he says that state governments, in particular, have failed to recognise that the overwhelming bulk of rental supply in Australia is provided by private “mum and dad” investors.
In fact, it’s their scandalous failure to build adequate public housing over a long period (public housing is a state responsibility) that has helped exacerbate the current housing crisis.
Research by Ray White’s Chief Economist Nerida Conisbee shows that between 1996 and 2021, there were an additional 1.1 million rental properties provided by “mum and dad” property investors.
Community housing groups added 41,000 social homes during this time, while there was actually a LOSS of 53,000 public housing dwellings provided by governments.
So, in 25 years, when the population of Australia increased by 7.5 million people, more than 50,000 public homes for the most vulnerable in our society actually disappeared.
Terry Ryder is also right that state governments have imposed all sorts of imposts on property investors, although I think it’s hard to argue against laws that require landlords to provide homes that are safe, cool in summer and warm in winter, especially since any repairs or improvements are completely tax deductible.
All these state government taxes and charges also have to be kept in perspective.
Many are actually deductible against the tax paid on any rental income, and the bottom line is that property investment done right is still the easiest way for the overwhelming bulk of Australians to build wealth.
It’s relatively easy for Australians on median incomes to get finance for property.
A bank will lend you a lot more than if you were going to purchase shares or other assets, increasing your all-important investment “leverage.”
It’s an incredibly safe form of investment.
The tax treatment of property investment in Australia is extremely attractive.
And the fact is that there is a huge demand for housing at the moment because of the ongoing shortage of homes, which is not going to be solved any time soon and, according to Terry Ryder, is actually being exacerbated by state governments.
This means that if you invest wisely in property, you will have the benefit of both strong capital and strong rental growth—and on average, both are currently growing faster than inflation—plus all the tax benefits.
As my business partner Lianna Pan says, “If your property price is going to grow 10%-15%—it's got the potential because of the underlying severe shortage of housing—it's not going to be affected by a small percentage change in land tax.”
“You have got to focus on the bigger picture, which is, “Is this an investment property market with the fundamentals to go up or not—is it going to perform or not?”
“And if the answer is “Yes”, these are small things that are not going to cause a major change to your overall outcome.”