Australian Financial Review Thursday 3 June 2021

Victoria’s recent stamp duty hikes, higher land taxes and newly legislated minimum standards in market rental housing are prompting landlords to sell out and put the supply of rental stock at risk, agents warn.

Last month’s state budget property tax increases, along with new laws around renting that came into effect at the end of March, had prompted some landlords to give up, said Michael Love, the head of Melbourne’s northern suburbs-based Michael Love & Co agency.

‘‘They’re turning around and saying ‘Is real estate the vehicle I want to be investing in for a return?’,’’ said Mr Love, whose company manages 6000 rental properties.

‘‘They’re investing to get a return where they’re taxed heavily, there are additional costs and holding costs which have never been there.’’

Anthony Webb, the head of eastern suburbs-based real estate agency PhilipWebb, agreed.

‘‘It’s the vibe of the legislation is just making the pendulum swing that much towards the tenants,’’ said Mr Webb, whose business also has a rent roll of about 6000 homes.

‘‘It’s this combination of things making landlords go – it’s too hard and we’re going to sell.’’

It’s likely some landlords will sell out in the face of higher costs. A regulatory impact statement accompanying the new legislation said it was likely that as a result of introduction of minimum standards, 9 per cent of rental providers would increase rent, 4 per cent would sell the property and 4 per cent would not acquire future rental properties.

But low interest rates, and a buoyant housing market, are also prompting many residential property investors to come back into a market they had previously departed.

Housing values surged to record highs across all capitals except Perth and Darwin, with more growth expected in coming months as strong demand from buyers outpaces the falling volume of listings, CoreLogic figures this week showed.

Dwelling prices across the combined capitals surged 2.3 per cent in May – the second fastest growth rate since the 1980s.

The latest official home loan numbers last month showed investor lending, rose in March at its fastest pace in almost two decades.

New data showing home loan commitments to investor buyers jumped 12.7 per cent from February, the fastest increase since July 2003, to a seasonally adjusted monthly total of $7.8 billion.

They were ‘‘enormous’’ numbers and challenged the picture of a market solely driven by owner-occupiers.

But real estate agents said that landlords selling out would lead to a net loss of rental stock that would hurt tenants.