Anyone who’s read my blogs knows I’m passionate about ensuring investors are both protected from unscrupulous advisors and have a voice in important conversations about the property market. This passion has seen me not only become a board member of the Property Investment Professionals of Australia (PIPA), but also accept a role as its deputy chair.
It’s also prompted me to lend my voice in response to a spat of political moves designed to burden investors during the current national rental crisis.
I think there’s an important element being overlooked and that’s the vital role new housing plays in helping us overcome ever-increasing rents and lack of available accommodation. In fact, rather than vilifying new-home investors, we should be incentivising them.
Here are five reasons why new-build housing is a win for all – tenants, investors, government and every Australian.
New housing adds to the rental pool
- The foundation of the current crisis lies in a fundamental tenet of economics – low supply versus high demand.
You only need to look at the sub-one per cent vacancy rates of population centres across the country to see it play out.
Now, the solutions proffered by some political players include freezing rents and imposing more restrictions on investors – it’s an “all stick, no carrot approach”.
But this is seeing some landlords with established properties choose to sell their asset to an owner-occupier (thus removing it from the rental pool) or transfer it into short-term leasing, free of restrictions.
But the most sensible way to add to the rental supply should be obvious: to build new housing.
New stock delivers fresh rentals to the market. It isn’t about displacing a homeowner for an investor. It instead creates new shelter as a relief to this stressed market.
In many respects, it’s the purest form of boosting supply without interfering with demand.
New home design is bespoke to an area
- Another important element of new housing is that it can be designed to appeal to the dominant demographic in each location. You’re getting the maximum benefit from each house for the local constituency.
The free market ensures this. Why would any investor in their right mind choose to build a new investment property that wouldn’t attract the largest possible pool of tenant interest? Who would construct a single level one-bedroom villa in an area dominated by families?
New property is an effective way to get the right type of housing into the suburbs needing it most.
New homes are an efficient use of limited resources
- Our country was founded on delivering the great Australian dream of “a detached home on a quarter acre block.” That sounds nice, however, design and construction have evolved way beyond this.
The fact is there are ways to create housing that generates the maximum amount of accommodation on the minimum amount of land area while also delivering excellent liveability to its residents.
Think about townhouses in some of our lower-density suburbs. In locations such as Bridgeman Downs in Brisbane, you can buy a home on a large block, however, a well-proportioned townhouse project in the same suburb will offer shelter to far more people. The townhouse’s design will also incorporate large bedrooms, living spaces, and comprehensive car accommodation for commuters.
Doesn’t that make sense for boosting supply while not burning through resources?
New homes boost the construction industry
- The construction industry is a major employer and income generator for our local and national economies. Promoting new housing boosts our collective balance sheet and brings benefits to everyone.
New housing stock is a win for investors.
- I know from experience that new housing is the most flexible option for your investment dollar. It creates housing that will meet your budget and appeal to a wider range of potential tenants. Thoughtful design and fit out also bring comparatively higher rents in each location.
New housing delivers excellent depreciation benefits too, helping minimise the tax burden on landlord owners.
It’s an ideal way to build a solid portfolio with exceptional cash flow and outstanding long-term capital growth potential.
The evidence is clear. Building new houses and townhouses is a win for all parties during the rental crisis. The upshot is that governments should consider ways to incentivise more investors into this product.
And I can feel the sentiment beginning to change across the country. People’s voices are being heard. Once politicians realise that stymieing rental supply will damage their re-election prospects, I suspect we’ll see more carrots and fewer sticks in the legislation.
Always review any property location research and investment analysis data, with a professional, QPIA (PIPA Member) qualified & accredited ASPIRE Property Advisor Network Advisor. Never rely on glossy sales brochures or property marketing information, ensuring a property is right for your strategy. Property Investing is about BUYING a property that matches your goals and aligns with your investment strategy. Never be SOLD an investment, know your numbers!
