The talks about a possible rent cap in Queensland will only worsen the rental crisis and infuriate investors, experts say.
PRD Real Estate chief economist Dr Diaswati Mardiasmo told that while the concept of a rent freeze would help alleviate financial pressures among renters, a policy enforcing it would not be appropriate for current economic conditions.
“A rental cap has more of the desired impact when the economic conditions allow for it, which is an economic condition that is relatively static — right now, ours economic conditions is anything but static. A cap signals a ‘stop’, yet nothing else is ‘stopping’,” she said.
Factors such as cash rate, mortgage payments, infrastructure costs, council rates, insurance, and any other fees, according to Dr Asti, are not static and continue to fall on landlords, who, then, pass them on renters.
As costs continue to rise, a potential rent freeze would essentially restrict the income landlords get from their investment properties.
“For rent freeze to be viable, there needs to also be a cap on the landlord’s costs — thus you have a balanced account between income and costs. The question is, will the relevant authority — whether city council or state government — put pressure on entities like banks, utilities, etc to put a cap on items that is a cost to the landlord?” Dr Asti said.
“Some will say, ‘But investors can negatively gear’ — yes they can, however there are also limits on what the investor can claim. Negative gearing tax claims can only be done once a year, whereas other costs are incurred on a monthly or quarterly basis. For an investor a balanced income and cost cycle is also important.
