Interest rate surge behind property shortage: New report

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Australia’s rental crisis has become a cause for concern, with a recent report attributing the Reserve Bank’s monetary policy tightening as a significant contributor.

The Property Club, an independent national property investment group, conducted a study that found that 35,000 fewer rental properties became available due to the central bank’s implementation of 11 interest rate hikes between May 2022 and May 2023.

The study was based on a median house price of $800,000.

Property Club President Kevin Young said these interest rate hikes have adversely affected property investment lending, resulting in fewer investors willing to become landlords.

This trend has led to a $30 billion decrease in loans given to investors in Australia, exacerbating the rental crisis.

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Many property investors have been compelled to sell their rental properties due to increased mortgage payments that exceed rental income, further worsening the crisis.

The rental crisis is also affecting tenants, who are struggling to find suitable rental properties. Mr Young suggested that reversing unhelpful lending regulations for property investors could be the solution to the rental crisis.

Since 2016, property investors have experienced higher interest rates compared to owner-occupiers due to new Australian Prudential Regulation Authority regulations.

Additionally, APRA made it challenging for investors to obtain lower-cost interest-only loans, resulting in many investors with principal and interest loans being compelled to sell their properties as they cannot manage the increased repayments.

Mr Young warned that the rental crisis will persist for years unless immediate measures are taken to restore previous lending practices for investors.

He urged regulators to act quickly by reinstating full access to interest-only loans for property investors, which is already implemented in other developed nations and would not require any additional government spending.

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