Real estate industry warns of ‘perfect storm’ for renters and investors

A single mother of three, Alicia Johns, spends almost half of her weekly income on rent.

Important points:

• The Real Estate Institute of Tasmania warns that the state’s housing market will become less attractive to investors, which will put pressure on rental rates
• The latest report shows that while rents are rising, they are unable to keep pace with the rising housing market
• It could force landlords to either flee the market or keep raising rents

“It’s tight … we’re just budgeting,” she said.

“We do Kmart runs. I cook the same meals every week – that [the kids] to hate.

“There is nothing left.”

Ms. Johns has lived in her Kingston home for approximately six and a half years. During that time the rent has only increased by $ 35 a week to $ 495 a week.

But while she calls her landlord “amazing”, like most Australians, she would like to own a home.

“There’s always the risk that … my landlord might say ‘I’m selling’ at the end of the year and how good is it, what’s next?” She said.

“The next landlord may not be that great … the thought of it is pretty scary.”

She certainly couldn’t afford a rent increase, and while it is generally cheaper to take out a mortgage in Tasmania than paying rent, the “thought of saving on a home” is not only daunting but “impossible”.

“I couldn’t. It’s impossible to save for a house allowance,” she said, “I’ve written off this idea.”

‘Privileged’ is not subject to rent increases

Even so, Ms. Johns said she felt “privileged”.

“I’m so privileged to have this home for the price because my landlord could easily get $ 650-700 a week on this home,” she said.

“I’m grateful my landlord didn’t jump on the ‘let’s raise prices just because we can’, but I know other people aren’t that lucky and it’s so tough out there.”

The latest report from the Real Estate Institute of Tasmania (REIT) shows that the average cost of renting a home has increased 15.3 percent over the past year.

But while rents are rising, they’re not keeping up with property prices – the average home price has risen 24 percent since June last year.

Housing market gloss is fading

REIT President Mandy Welling said this made the real estate market less attractive to investors.

“We’re starting to see that rental returns for landlords are not as cheap as they used to be,” she said.

“They pay a premium and … they are private landlords, they have to run this business as a business.

Mandy Welling says rental returns for landlords are no longer as cheap as they used to be.

ABC News: Laura Beavis

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“The last thing we want to see is they have to raise the rent to make loan payments on the property easier.”

The REIT report found that around 19.2 percent of all sales in the June quarter came from investors, less than 25 percent needed to stabilize the rental market.

At the same time, rental vacancies are at an all-time low, with Launceston recording 1.1 percent, Hobart 1.3 percent and the Northwest 1.7 percent.

Ms. Welling said the much-discussed rental ceilings would drive investors “fleeing the market” and lower investment returns could drive them off as well.

“When we see fewer people investing in rental property in the state, we’ll see [more competition and increased rents]”Said Mrs. Welling.

“In the worst case scenario, it is a perfect storm.”

She said lower interest rates would “help avoid suppressing the scenario,” but as mortgages go up, rents would likely go up too.

“It comes back to the roots, we don’t have enough supplies,” she said.

“We have a large number of consumers out there looking to buy Tasmania property, but a shortage of inventory is driving prices up.”

At the same time, Ms. Welling said mainland buyers are increasingly watching Tasmania’s housing market, which was 17.4 percent in June.

The majority bought real estate to move to Tasmania.

“When we start to see things calm down [around COVID]”I think we can expect a significant number of people to come to Tasmania,” said Ms. Welling.

“Just because you can doesn’t mean you should”

Kate Wadley recently started landlord but doesn’t believe in charging the highest rent.

“The rent we charge on the property we just bought is more than enough to cover our mortgage repayments,” she said.

“We chose not to overcharge, even though we could. We could ask for an extra $ 100 a week.”

The industry says lower interest rates help break the situation with a band aid. (

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She started a group called We Are Fair for landlords who share the same point of view as her.

“It is not the renter’s responsibility to cover all of your expenses,” she said.

“If you expect your tenant to pay for the full cost of your investment, you shouldn’t invest. You can’t afford it.”

She said that just because property prices are rising, landlords who already own investment houses shouldn’t increase their rents.

“When your investment income increases, you have no right to increase the rent.

“Just because you can doesn’t mean you should.”

Tolls for real estate agents

Rental costs rose by 15.3 percent last year (

ABC News: Loretta Lohberger

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Given the inevitable spike in interest rates and increased competition in the state’s housing market, Ms. Welling only hoped Tasmania could fix its inventory shortage.

“I know a lot of people … think this is a fantastic time for real estate agents … but it’s also very tough,” she said.

“To stand in front of people who are constantly missing out and trying to get their families where they want them to be, and we are the bearers of bad news – it’s just not fun at all.”

Ms. Johns is happy and lucky to be able to afford her rental apartment in Kingston, but says “It doesn’t feel like home”.

“I would like to post pictures … have a dog, but we can’t,” she said.

“As much as I try to make it feel like my own space, it’s not your home.”