Opinion Editorial by REIV CEO Kelly Ryan.
Published In the Herald Sun on Saturday 27 July.
The housing market, like any market, is subject to the simple laws of supply and demand. Low supply and high demand pushes prices up, and the opposite is true when supply is plentiful. This basic economic principle is why the Victorian Government must be cautious in implementing the new minimum standards for rental providers, which could prompt a drop in supply and leave renters without access to affordable homes.
With vacancy rates sitting much below the preferred 3% mark and rental prices rising consistently, supply is tight, prices are high and demand is persistent.
The Victorian Government’s intent to improve the energy efficiency standards of rental properties is commendable. However, the reality of rolling out these standards too quickly will create significant financial pain for rental providers in a very short period.
The Government has estimated energy efficiency upgrade costs to be $5,519. However, analysis by independent groups has shown estimated costs to be significantly higher. The Gas Appliance Manufacturers Association of Australia demonstrated the typical upfront cost of switching from gas to electricity in a house would be $16,000 to $21,000.
‘Mum and dad’ investors supply homes for over 88 percent of the rental market. While some will pass these upgrade costs to renters, the expectation of upgrading properties in just over 12 months will likely force the hand of rental providers with dire repercussions for the entire market.
The Real Estate Institute of Victoria recently put forward several recommendations to the Victorian Government on behalf of our state’s real estate industry.
The first recommendation asks for financial assistance for rental providers. The cost requirements for energy-efficient upgrades must consider the already high costs of running and maintaining a property, particularly in light of recent increases in property taxation and interest rates.
Secondly, with significant costs and limited labour availability, we want to see the implementation lead time extended to 36 months. Consideration should be given to the different needs of different properties and allowance for a transitional period should be made.
Additionally, we’re calling for clearer details and transparency around exemptions as well as sector education to ensure all parties are clear on their obligations.
While there’s no argument that appropriate minimum standards for rental properties are needed, greater consideration must be given to the planned roll out. In an acute housing supply crisis, supporting rental providers with financial incentives and longer timeframes as they navigate a challenging market is key to retaining supply of rental properties.
Media Contact:
REIV: media@reiv.com.au 03 9205 6607 www.reiv.com.au
