“Through the roof: rents to soar 20%”, screams today’s SMH headline, playing to Sydney’s unending love affair with a real estate story, but there are a couple of contradictions breeding in the bricks’n’mortar patch.
The SMH tries to blame the rent rise on investors selling real estate to put the money into superannuation, sourcing that to Macquarie Bank economist Rory Robertson. Trouble is, Robertson doesn’t really say that.
His latest RBA Watch makes a point about an expected rush of wealthy investors selling real estate before 30 June, but he’s interested in the temporary dip in housing prices this might cause, not rent:
Presumably, the nearer investors are to age 60, the more likely they are to sell (geared and ungeared) properties in order to buy assets that qualify as “superannuation”. Many younger investors, however, will choose to hold on to their investment properties (even buy the “dip”?), because the use of gearing in super is restricted. Similarly, ungeared properties still will fit neatly inside – rapidly growing – DIY super funds, limiting somewhat the size of the coming reallocation out of property.
The extent of the coming bulge in tax-based selling of property and its effect on home prices is unknowable at this stage (housing markets largely are closed until February), but talk to a few real estate agents and you’ll find that the property/super switch is a growing thing. All one can say with confidence is that peak downward pressure on home prices in 2007 probably will emerge in the run-up to the closing on 30 June of the extraordinary one-off window for the well-off to plonk up to an additional $1m worth of existing wealth into “superannuation”.
The “20%” hike figures comes from a comment by the NSW Real Estate Institute president and even then it’s “as much as 20%” rather than anything across the board as landlords catch up on several years of flat rentals.
And just to confuse the matter, the Smage has another story suggesting it’s the high price of real estate that’s deterring investors from buying, not anything to do with superannuation.
I think it’s just called market cycles working out. And it must be January.