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Airbnb Ban: A Solution to the Rental Crisis?
90 Plays4 months ago
Maybe try this one as a title: Priced Out: The Rental Crisis Crushing Aussie Dreams
Struggling to save for your first home? You're not alone. In this eye-opening episode of Finance in 5, Jayden and Simon expose the shocking truth: Aussie rents are skyrocketing SIX TIMES faster than wages! Discover:
- Why your rent keeps climbing (and your savings can't keep up)
- The hidden forces shaping the property market
- Game-changing strategies for first-time buyers in this tough market
- Crucial updates on tax cuts, wages, and super that could boost your buying power
Don't miss this essential guide to navigating Australia's housing crisis and turning your homeownership dreams into reality!
Ready to explore your options? Get a free assessment from the experts at Hunter Galloway: huntergalloway.com.au
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Transcript
Rent vs. Wage Disparity: A Growing Concern
00:00:00
Speaker
Welcome to this week's Science In 5. Rent a skyrocketing more than six times the rate of wages. Yeah, you heard right. We're about to explore this shocking disparity, how it affects you and what can be done about it. We're going to take a closer look at specific regions like the Gold Coast and Melbourne to understand this nationwide phenomenon. and So stay tuned. You're not going to want to miss this chat.
Guide for First-Time Home Buyers
00:00:20
Speaker
Welcome to the Buying Your First Home Podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home. From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
Impact of Wage Stagnation on Rent Affordability
00:00:45
Speaker
All right, Jane, let's paint a picture here. So imagine your wages have gone up by just a measly 0.8%, while the rent on your home is shot up by a staggering 5%. It's a nightmare scenario, and it's unfortunately now a harsh reality for many Australians. So asking rents for houses rose by more than six times the rate of wages in the March quarter from a comparison between the ABS, wage price index, and domain data. And it's not just a one-off, this has been happening consistently for the past four years. It's a trend that started with the pandemic and it shows no signs
Pandemic-Driven Housing Demand Shifts
00:01:22
Speaker
of slowing down. Think of it like a runaway train that just keeps on picking up speed. So what's driving this insanity? Well, it started with pandemic. People fled, chairhouses, seeking more space, home offices, and a bit more comfort.
00:01:36
Speaker
And as a result, every household size shrunk and that was fine while there wasn't any migration and hardly any population growth. But obviously things have changed as we've got back to the regular migration levels. And now to that you've got the construction crisis. So building homes isn't as simple as it sounds. Costs are up. The supply chains are still catching up to what happened during the pandemic. So developers are facing higher expenses and these costs are being passed down to renters. Yeah, I saw this crazy article searching the forums the other day and one of the steps and the progress of, you know, finding a home, getting a builder was finding a builder that has plans that you like and that isn't going to collapse in the next 12 months. It's just a frightening thought to go through. Yeah. And experts, they're sounding the alarm. So if rents continue to climb unchecked, we could see a surge in homelessness. I think some people are already experiencing that.
00:02:32
Speaker
And it's a real and present danger and not just a theoretical concern. Yeah, and it's not just about the rents has been a historical lack of investment in social housing. So it's a bit
Property Investor Challenges: Rising Costs & Regulations
00:02:42
Speaker
of a double whammy. It's pushing more and more people to the brink. So let's talk about the other side of the coin here, the property investors. And for years, real estate has been a goldmine offering these juicy long term gains and steady rental yields. But now they're feeling the pinch as well. Yet investors are facing higher holding costs and new regulations. States like Victoria, for example, have introduced land tax and stricture controls and rent increases, which are eating into investors' pockets. But the flip side is they're also the ones providing much-needed housing in the absence of government-built housing.
00:03:18
Speaker
And it's an interesting point here to think about it. I think property investors often get a bit of a bad rap if they're the ones who are increasing the rent. It's easy to think of all landlords as on on the evil side, but I mean, there are plenty of people who might just have like one investment property or two and you know they're just trying to build wealth themselves and they're kind of feeling the pinch on the side of you know increased interest rates and there's a whole bunch of other issues at play here as well. And I think plenty of them aren't the money grabbing people that some people like to think of them and they just want to be able to cover their costs more or less. So it's a bit of a difficult situation for them as well.
00:03:56
Speaker
Yeah, we've seen this translate, you know, as the costs have been pushed on, some rental increases are
Airbnb's Influence on Housing Market
00:04:02
Speaker
getting crazy. So like on the Gold Coast, for example, median rents have hit $700 a week, which is a 62.8% increase since March 2020. And the crazy thing is, there's heaps of units, there should be heaps of places to stay, but short-term holiday rentals are taking potential property and stock you know outside that long-term pool. making long-term rental scarce and driving prices through the roof. So what's the solution here, Simon? Banning Airbnb, potentially. And we've seen that in Byron Bay, the councilors, it's taken years of consultation, but from September this year, Byron Bay is reducing some of the caps on short-term accommodation. So you're capped to renting out your home in some of the high tourism appeal areas of a maximum of 60 days in any year period. So at the moment,
00:04:48
Speaker
It was up to 180 days. You can have your place in Byron Bay in these pretty specific areas. In Byron Bay, in Brunswick, heads rented out for 180 days. But from September 2024, these new restrictions are going to be in place. And we've seen a similar thing in Brisbane getting passed where the council, as one of their election promises, is sort of stepping up and saying, well, they want a permit system to reduce the Airbnb's. It's happened in New York as well, so it seems to be happening around the world where they're trying to push more properties into this longer term pool to create more stock and opportunity for people to have accommodation. Yeah, and on the subject of Airbnb, you know, when it was first released in 2008, who would have ever have thought it would have such a global effect on property all over the world? I stated some Airbnbs and
00:05:32
Speaker
Portugal and it was like an individual room in like a Portuguese house and almost like a homestay and it was like a super nice experience and it was a great way to travel but these days I'd say I don't know maybe 90% of the Airbnb's that you see on there are just purely there as investment properties and it's a different way to buy property and rent it out so this is happening all over the world there are plenty of different cities that are facing similar issues with this kind of reduced supply for residential people because a lot of the housing stock is getting diverted to this short-term state accommodation.
00:06:07
Speaker
Yeah. And interestingly, Victoria, the way they've done this is they've added extra tax. There's a seven and a half percent tax on Airbnb's. And Melbourne particularly has had potentially a bit of a positive impact. So in Melbourne, you know, I guess the median rent is relatively affordable, like 560 a week. But even so, rental costs are up 13% year on year because I guess to your point earlier, Simon, like there's more properties being taken out of that rental pool. There's less investors, people buying at home to live in and it's making it more unaffordable from a rental perspective. Yeah, it's pretty much Melbourne's saving grace is that they do have this greater housing supply than most of the other cities in Australia at the moment and fewer people migrating there. So it's pretty much the only silver lining in an otherwise pretty grim picture of the rental market in Australia.
00:06:53
Speaker
And I guess that's the twist as well. It's just not that inner cities are out of suburbs are seeing rental strikes as people being priced out of those central areas. So Sydney's, you know, Parramatta and Blacktown rents are up 16.1% and 14.5% respectively as well. And this is something we see both with property prices and with rentals, you know, there's a ripple effect. So one area becomes more expensive than people will be pushed a little bit further out. And then as this wave of people move to the next suburb on then the prices increase there as well. So you get these unexpected hotspots of rental growth. And really it's reshaping the rental landscape in very surprising ways. Yeah, not to really drain on the negatives then, but like, I guess what is the way out? Like for investors, it might be trying to get those longer term, more stable tenants. It's a bit of a win-win there. The government's obviously got negative community tax incentives in place.
00:07:47
Speaker
That was previously a bit of a political thing that came up in the last election. It doesn't look like it's going to come up this time. But I guess on the government, though, they really need to step up really as far as releasing more land, increasing supply, making it cheaper to build. Because at the moment, even clients mind that a developer is not getting on again, the developers get a bit of a bad Stick like the landlords I get seen is greedy and they're the ones that are profiteering and that sort of thing but at the end of the day need someone to build more houses to increase the supply to make these more affordable and and do more affordable housing.
00:08:19
Speaker
because you know the government's obviously set targets, but as we've covered in other episodes, it looks like we're probably going to fall short of some of those targets there that they're trying to hit. And this whole situation, like it does get pretty adversarial. you know The investors, the tenants, the policymakers, there's a lot of tension between these different parties, but really the best way to make meaningful changes is if there's cooperation. like If there is a way to actually get everybody aligned towards what we need, which is more housing supply at a cheaper rental rate, And if we don't play as much of the blame game and just try and take some action here then that's i think gonna be. Probably one of the best things we could do. So yeah i mean it's a wake up call really in terms of how quickly rent arising the outpacing wages and squeezing renters like never before property investors are also feeling the squeeze from the high costs.
00:09:08
Speaker
And even the builders, as you say, like they're also struggling. A lot of them are going out of business because they can't manage to gape up with the rising costs as well. So I'd say if you're a first time buyer and you're looking at your options here with rental versus buying, I definitely would be considering looking at where you can buy and maybe in a place that's affordable for you right now and get out of that rental market. You start paying off your own mortgage instead of somebody else's and because property prices and where they're going, you'll be building equity and you'll be able to start sort of leveraging up on what you have and then start moving further up on the property ladder.
00:09:47
Speaker
Yeah, and that's, I guess, always the debate too, like at least even if property prices stay flat for a number of years, you're building equity because you're sort of paying down the loan that you've got there over the 30-year period. Potentially, if you just pay the minimum repayment over 30 years, that loan will be completely paid off. You'll loan the home outright versus with renting, you'll unfortunately still be renting and still be subject to those future rental increases out there. So it's definitely one to look at and it could be worth even just forecasting for yourself what that looks like if these rental increases do continue. versus if you get a home loan and then what that looks like.
Upcoming Economic Changes Affecting Australians
00:10:18
Speaker
But shifting gears now, there's some big updates that could impact your financial standing. If you own a home, if you're renting, it doesn't matter. It's going to impact everyone across Australia from July 1. So there's tax cuts, some changes to minimum wage, superannuation changes. There's quite a bit here to unpack. So Simon, I guess starting with the major change, we've touched on it before, but the stage three tax cuts.
00:10:40
Speaker
Take us through that. Yeah, Jayden. So starting July 1st, the lowest tax rate for people earning $45,000 or less will drop from 19% to 16%. Meanwhile, the 32.5% tax rate will fall to 30, but we'll now apply up to 135,000. And for those earning over 135,000, the tax rate will increase to 37%. And the top bracket of 45% will now kick in. at 190,000. Yes, it's pretty huge. So definitely jump on, you know, potentially tax return can sort of work out the figures there, how it's going to impact you as well. And the other big news is with minimum wage. So big change there is relatively minimum wages set to increase by 3.75%. So some good changes there, I guess, inflation numbers hopefully will start to die down and that'll be more meaningful. But with the tax cut and an increase, it's obviously every little bit is going to help.
00:11:37
Speaker
And for new parents, there's some good news. The government's paid parental leave is also extending. So what's happening there, Simon? Yeah, so eligible parents will now receive up to 110 days of paid leave, which is up from 100. And this will further increase to 120 days in July 2025 and 130 days in July 2026. And the rate of paid parental leave will also rise in line with the minimum wage. Well, and I guess the other one there is energy bills. This has been a pretty hot but topic with that massive increase is even above inflation really. But the energy regulators have announced that the 2024 to 2025 default offer electricity prices will most likely see reductions. So price will decrease by $17 to around $190.
00:12:24
Speaker
depending on the allocat location. And with some of the rebates, all households will receive a $300 federal rebate applied as $75 quarterly credit starting from the 1st of July. So a good win there because even you know the Reserve Bank saying that could potentially help yeah people save more money because you're going to save that $300, put that in savings and hopefully start off inflation. If everyone spends that money, then it could affect the interest rates and different things. so There's going to be more inflation. So let's see how that transpires a bit later in the year as well. And next up, the super guarantee is also going to increase. So that's going to increase to 11.5% from July 1, and it'll rise further to 12% in July 2025. And the before tax contribution cap is also increasing from 27,500 to 30,000. And the after tax contribution cap will rise from 110 to 120,000.
00:13:16
Speaker
So more super is also great news for all Australians and on the subject of super the first time home super saver scheme is actually a really great way to save up view deposit as well. You know, we've got plenty of information out there about that. If you look into it, it's a great way to help you to get to that first deposit without paying so much tax on the money you're saving. Yeah, and then I guess still on the cost of living, some interesting data from Finder about how Australians are coping with that cost of living, the current expenses there. So they've revealed that 42% of Australians find their rent or mortgage to be the most stressful expense, followed by groceries actually at 41%. So pretty close there than electricity bills and petrol at 22%.
00:14:00
Speaker
say The scary one I saw here Simon was that almost half of Australians could only survive off their savings for a month or less if their income dried up. So I guess like just one to think about really seriously is just reviewing your insurances and just making sure, well obviously firstly trying to build up your savings buffer but if that's not possible, checking out that you've got protection in place for things to cover you there if something were to happen because yeah, it's a pretty scary prospect if that ever happens. Yeah, so I think a lot of people would have income protection insurance kind of linked to their super. I know the super I use has that. And it's worth looking at that and making sure that that's up to date and sort of is in line with what your financial situation is like. It's the kind of thing you hope you never need. But it is the kind of thing that you're very glad to have if you do need it. Especially if you have a mortgage and some other outgoing payments, it gives you a lot of peace of mind to know that
00:14:52
Speaker
you've covered in the event of being unable to earn an income. So definitely a good reminder to check that out and make sure that you're covered there. Yeah. Interestingly, I spoke with a financial advisor about a month ago and he said, you need to check out that one that's in your super. So this isn't financial advice, obviously, but there's usually certain conditions of releasing the funds. It can be around your age of retirement and different things. but he said at the moment, one thing that has increased a lot is just claims around mental health. It's probably one of the highest claims now for potentially not being able to work and all the sort of flow on effects that has. So yeah, just a reminder, I think definitely to look at that. But the thing that tells about financial health in Australia is like you just need to try and not bury your head in the sand if ever that happens, try and get on top of it now and then where you can try to increase your savings and have
00:15:41
Speaker
a buffer, you know, at least a couple of months if you can, and build up over time because you never know what could be around the corner. So I think yeah, some of these changes like can be a really blessing and mostly good news really, like with you know, having extra money, famously super tax cuts, wage increases, all good news there, hopefully inflation starts to sort of settle down with some of those costs of electricity and things going up pretty rapidly over the last year. And it's worth at least doing we get a bit of tax planning and seeing what these changes in the super can mean for your situation. Absolutely. So next up, we've got a bit of a contrarian opinion here from some people in ANZ and Optus, for example, they're saying that the upcoming tax cuts are going to
00:16:29
Speaker
causes some extended rate pain. Rather than being a benefit, they're sort of taking the negative view on it. So not everyone agrees on the impact and we've got some opinions to explore here. But Jaden, take us through what the chairman of ANZ bank likes to think about it. Yeah, Paul O'Sullivan, the chairman of ANZ Bank, believes these cuts will delay actually reductions in interest rate drops, basically, prolonging the financial stress because he says that potentially people are going to have more money, more confidence, you know more cash in the bank at the end of the day. And although a lot of the ah RBA's research, when they've spoken with people, people said, oh, in the current environment, I'm going to be more willing to save it. I'm going to take that $300 from electricity. I'm not going to put my savings, I'm going to put my buffer.
00:17:14
Speaker
Paul Sullivan, the chairman of ANZ, thinks that people are going to go and spend it, which is going to add to the inflation and potentially attract the interest rates at the current level and mean that relief will take longer to flow through. And I think that's what Philip Kronikin, the chairman of NAB and a director at Woolworths, points out that the extra cash could lead to this more spending. And if people are spending more, that puts more money into the economy and that's where the inflation comes in. I don't know, I guess I'm certainly not planning on spending any more money with the upcoming tax cuts. I think it's a much smarter idea to save it. So you won't count me in on one of the pro inflationary people, that's for sure.
00:17:55
Speaker
Yeah, I guess wait and see, like there's still the amount of people I talk to at the moment. I guess it's different too. Like, you know, during COVID, no one went on holidays ever. So there was like a two year period where it's like, oh, where are you going? Maybe the coast, if that, maybe to the shop for milk. It was about as far as you went. And it seems now that the only difference is this year, definitely, I've noticed a lot of people are just in conversations, a lot of holidays to Japan, a lot of like trips to Europe and that sort of thing. So that's going to add to the pressure, I guess somewhat as well. But definitely, Let's hope that the survey results are right, Simon. Everyone's going to save it and be sensible and kind of not add to the inflationary pressure that we're seeing. Wait and see. I'm definitely in that box of saving because school and kids are expensive.
00:18:41
Speaker
All right. So let's shift on to this Commonwealth Bank quarterly perspective. This one's a bit more technical, but it looks into like the state demand growth, business, investment, housing, lending, and a lot more. And there's a few good nuggets here in terms of useful information for first-time buyers. Yeah, so there was like overall state demand. I'll talk through the stats and you explain how it's relevant. So state demand and growth will include a link to this in the show notes below, but New South Wales and Queensland are leading the charge with strong state final demand, SFD, growth of 2.1% and 2.8% respectively.
00:19:18
Speaker
What does that even mean, Simon? Is that relevant for anyone? So really all you need to know is that if you're a first-time buyer, if you're looking at buying a place, a strong state demand and often signals a competitive market with the potential for price increases. And it also reflects economic vitality, which is something that's reassuring for long-term investment or for buying and holding a place for a long time. Yeah. And so the more investment, the more interest, the more jobs, I guess the better it is. But interestingly, building approvals have very pretty significantly. So WA leads with 42.8% annual growth in building approvals, while states like New South Wales and Victoria has actually seen declines. And more building approvals means more houses coming onto the market, which can ease some of those supply pressures and potentially stabilize the prices.
00:20:11
Speaker
On the flip side, if there's tight lending conditions, which means it's harder to get a home loan, it can mean that a first-time buyer, you need to have your finances in top shape to secure that loan. Yeah, and dwelling prices are on the rise across most capitals, so Perth, like crazy, 22% annualized growth and vacancy rates from an insanely low-impertant Adelaide. So rising prices, low vacancy rates, as we've spoken about in the past, this is a pretty highly competitive market. so The best strategy here is to look at the less competitive suburbs or consider the whole rent-vesting approach and buying a place you can afford now and living and renting where you want to be.
00:20:52
Speaker
and I guess as an extension of that, you know, some other indicators like the labor market remains pretty strong across the country. So WA still boasts in the lowest unemployment rate of 3.6%. Wages have risen by 4.1% over the past year with Tasmania and Queensland ah leading the growth as well there. So yeah, with increased wages and along with the tax cuts we just mentioned, it does mean that it might make it a little easier to save up for that deposit. And certainly having stable employment and a higher income can help you get a mortgage easier.
00:21:23
Speaker
The more you're earning, the better your borrowing capacity tends to be as well. So you can look at potentially buying a place that is a little more expensive if you've got a higher income and also makes managing repayments more feasible as well. So wage growth is always a good thing. And equally, I guess, population growth, it's good if you own a place in a sense, because it often, you know, interstate migration, there's more people, which we've seen overseas and interstate migration laid by Queensland and WA, which has sort of pushed the price up because more people, more men for housing, but you know, could be worth considering emerging suburbs or further places out if it's getting saturated. The last point that's interesting is public investment. So public investments like government infrastructure projects across different states, but Brisbane and Adelaide,
00:22:07
Speaker
have ever remained pretty high. So this can be a double-edged sword because we've definitely seen it in Queensland where all this public infrastructure works, lots of you new roads and buildings and different things and potentially stadiums coming up to the Olympics means that the cost to construct for residential and other projects gets more expensive. So it can sometimes be good because there's more money being spent, gentrification happening in those suburbs, but it can mean there could be less private development because there's high costs. And the other aspect of this is that it's always good to have better infrastructure and amenities. you know It's nicer to live in a place with that. However, on the flip side, when these infrastructure improvements are made, it attracts more buyers and makes the place more expensive as well. so
00:22:52
Speaker
I know there are a few people out there who are looking at buying in some of the areas where the Olympic projects are being developed because they're expecting a major increase in demand once all of the infrastructure and the upgrades are completed. So it's something to keep an eye out for as well, as it wherever there is there's infrastructure developments being built, there is likely to be price growth in the future. So that's it for today, guys. Thanks for tuning in. First thing we went through, rents, they are going up. It doesn't look like there's going to be any ease of rents moving forward. If you are renting, if you're trying to get those costs down, potentially maybe consider places where you can split costs, go into sort of house sharing situations that might help sort of get some of those costs down. If you are considering buying, have a look at those figures and seeing what it looks like if the rent increases continue and verse that compared to buying your own home.
00:23:41
Speaker
Next up, we went through the potential tax cuts for some reprieve there, if you are feeling the pinch of the cost of living, especially with some of those energy and electricity rebates. And then last up, we went through the Commonwealth Bank report. We'll include a link to that below because it's interesting to see what some of that impact is going to have on the property market. If you are looking at buying or you need help with refinancing at Hunter Galloway, we're the home for home buyers across Australia. So if you need help, hit us up at huntergalloway.com.au. Until next time, see you guys.