Century 21 boss says ideology is not economics

Property investors continue to shy away from regional Victoria and its onerous battery of state government taxes.

And now that confidence crisis has been severely compounded by a federal budget determined to meddle in commodity markets.

Century 21 Rich River Real Estate director Andrew Lochhead says where he is seeing the most immediate damage is the “ideological dreams” of a government setting the price for rentals going incredibly awry.

Andrew says the market has moved from a time when someone ringing his office for a rental property could have access to pages of listings to an era where nothing is available.

And he says when something reasonably good does show up, it comes at a stiff price.

“The Victorian government’s direct meddling in the property market has delivered the exact opposite of what it was dreaming of achieving,” Andrew explains.

“What it has done is force a lot of investors to look at the soaring tax bills and convince too many of them to sell up and get out,” he says.

“Now Canberra has weighed in attacking capital gains tax concessions, further deteriorating investor interest in the property market.”

At the same time, Andrew says there has been little change in the first homebuyer market, driven by what he sees as a more relevant support for the industry with the 5 per cent deposit incentive.

He is also cautioning investors not to panic sell.

“Obviously if you have a nest egg property and now find its value and tax viability is going backwards, absolutely sell and move on,” he says.

“For many, the couple with a single investment property as a retirement nest egg are finding that’s not what it is anymore.

“But I am also reminding people things do turn around, they always do, and if you can afford it in the short term, and have good long-term tenants, I strongly recommending you hang in there.”

Andrew says Century 21 has discovered – and he hears this from other companies – that when rental properties are being dumped by investors, in 90 per cent of cases the tenant is displaced and an owner-occupier moves in.

And he cannot see how that is achieving anything for those in the rental space.

“Government interference in the open market causes chaos – it’s not government’s job and its unintended and unforeseen consequences can be significant and long lasting,” Andrew says.

“If, on one hand, you take away the returns of investors, then basically the only way for them to recover those costs are through increased rents – that’s not going to solve the rent crisis,” he adds.

“Within the Century 21 group, Clayton, which has been one of our biggest rent roll offices for a long time is now seeing that roll shrinking for the first time as landlords get out – that’s an alarm bell if ever you needed one.

“I have no qualms about the need for minimum standards in areas such as the property rental industry, but landlords are being belted and expected to pick up all the cost – that’s not how economics work, the cost has to shift somewhere and that will be the tenant.”