The councils where interest rate rises have hit landlords hardest

CoreLogic Australia head of research Eliza Owen said rising mortgage repayments were hitting both investors and renters.


Mr Owen said higher repayments had put off investors, with the latest Australian lending figures showing the number of new loans issued to investors had fallen by about 45 per cent since peaking in March last year.

“You have a very blunt tool to deal with inflation [with interest rate rises] This is affecting all new investors looking to enter the market,” Owen said. “Ultimately, this is limiting the supply of rental properties at a time when it really matters. “

Investors won’t be able to cover rising mortgage costs through rent increases alone, and many losing money are looking to use negative gearing, she said.

With more investors losing money on rental properties than in 2020 and 2021, when interest rates were historically low, the tax revenue from these benefits is expected to increase significantly this year.

Independent economist Saul Eslake said two-thirds of landlords were negative gearing at the last peak in house prices in 2017.

That number will drop significantly when interest rates hit record lows in 2020 and 2021.

“We’re now going to see a significant rebound in that number,” Eslake said.


But AMP Capital chief economist Dr Shane Oliver said rising mortgage costs might actually encourage more investors into the market, as they have done in the past.

“It makes negative gearing a lot more attractive than it was a year ago,” Oliver said.

However, the increase in investors also depends on whether they will enter the market at a higher price than before, he said.

Brendan Coates, economics program director at the Grattan Institute, doesn’t think investors selling properties will have an impact on the market, especially if the buyers are tenants because they no longer need to rent.

“Selling to first home buyers has zero impact on the rental market,” Coates said.

Investors who were previously positively geared are now more likely to find themselves losing money and claiming negative gearing deductions.

More investors are looking to sell their rentals.

More investors are looking to sell their rentals.Credit: petre

an analysis by Parliamentary Budget Office representing the Australian Green Party Negative gearing was forecast last year to soar to $97 billion over the next decade, but those cost calculations were based on lower interest rates and lower rents last November, meaning the forgone income is now even higher.

Investors considering their mortgage bills may face other rising costs that could affect their decision to sell.

Jellis Craig Armadale partner Michael Armstrong said the investment market had been hit by the Victorian government’s higher land tax on investment properties and holiday homes last year.

He said calls were lit in March after investors received their latest land tax bills, with many wanting to sell.

He said additional maintenance-related costs introduced by Victoria’s new tenancy laws were also encouraging investors to exit the property market.

“People really don’t have an incentive to keep rental properties at the moment,” Armstrong said. “All the new regulations make it more expensive to maintain them.”

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