Wednesday, 11th of October 2023
Rent Freezes And Rent Caps: Why WA Property Investors Shouldn’t Fear Them
If you’re a property investor in Western Australia, you’ll no doubt be feeling the pinch from rising inflation and interest rate increases placing pressure on your bottom line. Further to this, the ongoing reform of the Residential Tenancy Act (RTA) has compounded uncertainty within the property market, with property owners cautious of proposed rental freezes and rental caps.
Whilst the RTA reform is still going through parliament, we’re here to assure property owners that there is no need to panic as rent freezes and rent caps are not included in the proposed legislation. Both the WA state and the federal government have ruled out rent freezes or caps, instead focusing on fixing the root cause of the issue, housing supply.
What Has Been Proposed in the RTA Reform?
As outlined in our recent article The Residential Tenancy Act Reform: What It Means To Property Investors, there are a number of proposed changes being considered.
One of the most notable proposed changes in the reform is a maximum of one singular rent increase every 12 months, which should not pose any threat to property owners who have appropriately set their rent from the start of their lease, whilst also reviewing the figure annually to mitigate the impact of 6-month rent reviews.
Further to this, the other proposed changes being discussed also do not directly impact your ability to set and review rent amounts, so WA property owners should feel positive about future rental returns.
Why Western Australian Property Investors Shouldn’t Panic
Recent news reports have been clear on why rent freezes and rent caps will only worsen, not solve Australia’s rental crisis. Whilst these freezes are predominately designed to benefit tenants over landlords, we’ve outlined some reasons why property owners in Western Australia shouldn't be concerned about the proposed RTA changes.
Addressing housing supply -- The Federal Government is currently not in favour of enforcing rent freezes and rental caps as they believe this will add further pressure on the nation’s housing supply issues. Since property investment is being encouraged to help introduce more rental housing within the nation, limiting rental income is likely to result in landlords pulling out of the market, which is something the government is trying to avoid at all costs given the extremely low vacancy rates.
Investor confidence -- While some political parties advocate for rent freezes and caps, the national government opposes such measures, as they don't want to hinder property investors from leasing their rentals, especially considering the current vacancy rate in Perth, which is currently below 1%.
REIWA is focused on housing stock -- It's crucial to understand that the states control tenancy legislation, not the federal government. The Real Estate Institute of Western Australia (REIWA) is actively working to address the rental shortage, prioritizing the needs of property investors who are vital to maintaining a healthy rental market.
Avoiding an investor exodus -- If the new legislation starts limiting investor profits, property owners in Western Australia may opt to sell their investment properties. This could further exacerbate the state's housing shortage, creating more problems than solutions. Considering Western Australia has the best property market conditions in the nation, it would be a shame to see investor activity dwindle from legislation that would limit profitability and growth.
Setting Your Rent To Market Value
One key strategy for property owners to navigate potential rent freezes and caps is to align your weekly rental rates to the current market value. Not only does this help reduce risk, it helps property owners remain cashflow positive, especially since mortgages have increased while rentals may not have been adjusted accordingly.
Property owners should also consider various economic factors and market conditions to determine an appropriate rental figure, including inflation, market demand, suburb performance and emerging property trends (to name a few).
Unsure if your current rental property is set to the correct market value?
Book a Rental Review with the experts at Perth Property Management who can provide a detailed Comparative Market Analysis with numerous economic, market and suburb-based metrics to provide you with an adequate weekly rental amount that offsets your mortgage, whilst ensuring your tenants are paying a fair market rate.
REIWA’s Focus To Protect Landlords
As reported in this REIWA article, rent caps and freezes were recently ruled out by the National Cabinet alongside a new set of proposed rental guidelines for each state – these include:
- Reasonable grounds for eviction
- Eviction appeals
- A national standard for single rent increases per year
- Rent bidding
- Strengthening domestic violence protections for tenants
- Limiting break lease fees
- Streamlining rental applications
- Dealing with short stay rental accommodation
- National consistency of minimum standards
Whilst the proposed National Cabinet guidelines are designed to improve consistency and fairness, REIWA has made it abundantly clear that their focus for the Western Australian market is simply addressing the housing shortage.
As stated by a Spokesperson for the WA Government in the above article, “The best and most important policy to boost the rental market is to increase supply – and this is our number one priority.”
Whilst a number of the above National Cabinet proposals are already in place within Western Australia, REIWA CEO (Cath Hart) pointed out that WA is a unique market in desperate need of investor confidence to offset the supply issues.
“WA investors have made it quite clear that increasing restrictions and removing no grounds terminations will see them leave the market and put their money into other asset classes.
At a state and national level we need a legislative environment that sustains and encourages investment as we need every investor we can get.”
- Cath Hart | REIWA CEO
Don’t Panic – Help Is At Hand!
If you need guidance or assistance with managing your rental property in these dynamic market conditions, don't hesitate to reach out to Perth Property Management.
We invite you to Request An Appraisal or to Contact Us today to speak with our experts to ensure you are getting the most out of your investment property and prepared for the changing landscape of the dynamic rental market.