Melbourne landlords’ have been tipped to get an up to
Melbourne families are facing a rental cost surge in the coming months that will add hundreds of dollars to their weekly cost of living and swallow planned tax relief.
Rental industry watchers are already reporting social media claims from landlords that they are planning revenge rate hikes in response to the federal budget’s changes to capital gains tax and negative gearing.
Meanwhile, the cost for tenants to keep a roof over their heads are forecast to grow at least $6 a week in every corner of Melbourne over the next three months, meaning that even the areas with the smallest increase will face a $312 a year added cost.
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The forecast from Found It indicates rent rises will completely wipe out the Australian government’s promised relief of a $250 tax break promised for working families, in the next financial year.
By July, rises would far exceed the $2 a week rent increase forecast by the nation’s Treasury in May’s federal budget – a sum $4 less than Found It’s $6 projection.
The property technology and research platform’s analysis noted there was already existing momentum in rising rents that would soon be compounded by a supply crunch, with new homes being outpaced by population growth, as well as rising interest rates pushing investors to recoup costs.
They are anticipating the situation will worsen ahead, with changes to negative gearing and capital gains tax likely to cut back on the number of investors buying property — creating a thinner market for rentals.
The upshot for Melbourne is hefty rental increases.
Bayside houses like 7 Esperance Ave, Brighton, are currently seeking $3400 a week for their six-bedroom floorplan — but that could soon be even higher if new modelling is correct.
Desirable inner Melbourne suburbs dominate the list of those where house rents are likely to rise the most after the federal budget’s changes to CGT and negative gearing.
At the upper end of the rental increases will be Bayside, tipped for a $13 rise in house rents, equivalent to $675 more a year, and $12 for units, as well as Stonnington, where tenants in houses and units will be out of pocket an extra $11 a week.
The minimum expected for houses is a $6 a week higher rental payment in Sunbury, Tullamarine and Broadmeadows, Brimbank, Melton and Bacchus Marsh and Wyndham.
The smallest anticipated increases for unit rents were $8 a week upticks expected in more affordable areas like Frankston, Brimbank, Sunbury, Whittlesea and Wyndham.
Property management firm boss and former Real Estate Institute of Victoria president Leah Calnan said she was unsurprised to hear suggestions that treasury’s modelling for projected rent increases could come in so low.
“I don’t know where they were able to achieve $2 from,” Ms Calnan said.
“It does concern me that we are going to see rents rise without the financial tax benefits that investors would normally have, it does raise the question of how much more can an investor support the renter in their care.”
Bayside unit rents are also tipped for the biggest jump in the city, which could mean higher rents for homes like 4/71 Crisp St, Hampton, currently advertised at $575 a week.
Metro Property Management director and former Real Estate Institute of Victoria president Leah Calnan fears without negative gearing renters will face more pressure to pay more.
Noting that with rising interest rates and land tax costs, many would more frequently have to consider rent rises if they did not have access to negative gearing.
The outspoken rental advocate behind the S—t Rentals Australia social media accounts, Jordan van den Lamb, also disagreed with the $2 estimate.
“As soon as the Treasury modelling came out, I tweeted that it hadn’t modelled for landlord derangement,” Mr van den Lamb said.
He noted that he had seen comments across landlord social media threads indicating existing investors who had their tax benefits protected were planning to raise rents as a protest over the tax changes.
Mr van den Lamb added that there should be more stringent enforcement of Victoria’s vacant residential land tax and greater capacity to compel owners to make empty homes available to tenants, with Prosper Australia recently indicating 100,000 Melbourne homes were empty or under-utilised.
This studio apartment at 37/92-94 Grey St, St Kilda, with a fold-down bed will set you back $400 a week — despite no dedicated bedroom.
Rental advocate Jordan van den Lamb has warned while tenants are already, he has no doubt rents will rise more than Treasury estimated.
While building costs remain high, he noted building new homes would just lead to more expensive residences that lower-income tenants could not afford and if the nation was to build its way out of the rental crisis it would need to be the government producing more public housing.
“People are struggling to keep a roof over their heads, we are seeing more and more people living in homeless encampments and we can’t afford higher rents, particularly while wages are moving so slowly and inflation is expected to be so high,” Mr van den Lamb said.
“But the rents will continue to rise.”
Tenants Victoria chief executive Jennifer Beveridge said while it was too soon to predict how the budget measures would impact rents, Victorian tenants had some protections.
A two-bedroom apartment at 2908/38 Rose Lane, Melbourne, will already set you back $700 a week — in a few months time that could be $712 a week.
Tenants Victoria chief executive Jennifer Beveridge has urged renters to fight back against rent rises using new powers granted to them by the state government.
“Considerations include, but are not limited to, the size of the increase relative to the current rent, the rate of increase compared to Melbourne’s Consumer Price Index, rents for similar properties in your neighbourhood, and the overall state of repairs and condition of your home,” Ms Beveridge said.
“If renters believe that a rent increase is excessive, they should challenge it to Consumer Affairs Victoria within 30 days of receiving the notice.”
However, she noted that the state needed more social housing with an extra 8000 homes needed each year going forward to accommodate those who could no longer afford market rent.
HIGHEST RENTAL INCREASES — HOUSES
Bayside — $13 more a week
Stonnington — $11 more a week
Boroondara — $11 more a week
Stonnington — $11 more a week
Darebin — $10 more a week
Port Phillip — $10 more a week
Yarra — $10 more a week
Glen Eira — $10 more a week
Manningham — $10 more a week
Brunswick — $10 more a week
A two-bedroom terrace house at 21 Oban St, South Yarra, is currently listed for rent at $750 a week, but in a few months time similar homes might be seeking more than $760.
HIGHEST RENTAL INCREASES — UNITS
Bayside — $12 more a week
Melbourne City — $12 more a week
Glen Eira — $11 more a week
Keilor — $11 more a week
Manningham — $11 more a week
Monash — $11 more a week
Port Phillip — $11 more a week
Stonnington — $11 more a week
Whitehorse — $11 more a week
Yarra — $11 more a week
Location names reflect statistical areas, not suburbs or municipalities
Source: Found It
The Budget’s Big Changes For Property Investors
Negative Gearing
– From July 1, 2027, negative gearing is limited to income you are drawing from rental properties, and you can’t deduct against your full income;
– Losses that are not claimed can be rolled forward into future tax years, up to and including when you sell the home, then deducted against future rental income or against the capital gains tax at the time of sale;
– Homes bought after 7.30pm, May 12, can only claim negative gearing until July 1, 2027;
– Homes bought before 7.30pm, May 12, will have negative gearing grandfathered;
– Exemptions: commercial property, new builds, off-the-plan purchases, homes bought as part of a Self Managed Super Fund;
Capital Gains Tax
– From July 1, 2027, the 50 per cent capital gains tax discount for investment properties owned for more than a year will be replaced by indexation and a minimum 30 per cent tax rate;
– Inflation will be deducted from the capital gain, then any real gains left over will be taxed at your marginal tax rate — though not less than 30 per cent;
– The major change is that under the older system 50 per cent of the capital gain was not taxed;
– It is believed homes bought after 7.30pm, May 12, and sold more than a year after that date, but before July 1 will be able to claim the old 50 per cent discount — however this may yet be clarified differently by the government;
– 100 per cent of any gains made for a home owned less than a year are subject to taxation;
– Homes bought before 7.30pm, May 12, will have capital gain fixed on July 1, 2027, with the home valued at that time and the new tax setting applied for any future gains thereafter;
– Exemptions: Your primary residence (100 per cent tax discount applies), buyers will be able to choose the old system or the new one when they purchase new builds and off-the-plan properties, superannuation funds are exempt from the changes;
– Experts believe properties that achieve annual growth below 4.5 per cent a year will likely be better off under the new system, which is fairly common for commercial investments;
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