Canberra caps push up rents ‘because you have one opportunity’

Canberra has proven rent caps are no quick fix to the housing crisis, with rents in the capital running hotter than in most major cities despite greater choice on the market.

A 'for rent' sign is seen outside a house in Canberra. Picture: AAP

Canberra has proven rent caps are no quick fix to the housing crisis, with rents in the capital running hotter than in most major cities despite greater choice on the market.

Real Estate Institute ACT chief executive Maria Edwards said the 2019 decision to limit rental increases to once a year and no more than 10 per cent higher than inflation drove up housing costs for tenants.

“Having lived through that experience … people end up selling the property because they don’t want to be that controlled and because they don’t have control over their other expenses,” Ms Edwards said.

“In the ACT it also stewed the enthusiasm to put rents up as much as you could because you only have that one opportunity, and it was prescribed, and you had a lot of uncertainty around what the land tax rates would be.”

Rents for houses in the ACT have climbed from $550 a week when the caps – an Australian-first policy – were introduced in November 2019 to $680 a week in September, far higher than the $575 a week being charged on average across capital cities.

Unit rents are on par with national averages. Growth has continued despite vacancy rates remaining higher than in other cities since the start of the year.

Paul Ryan, senior economist at PropTrack.

The federal Greens have been pushing for a two-year national rent freeze and caps on landlord-issued increases to help slow soaring cost of rental properties.

New rental listings are exempt from the ACT policy but PropTrack senior economist Paul Ryan said it was hard to attribute slower rental growth in the region to the caps given vacancy rates were higher than elsewhere. “Basically, there’s just more supply of rental properties,” Mr Ryan said.

“We’ve seen a pretty solid development pipeline in the ACT, a lot of apartment development across the city. Combined with that there seems to be a bit less demand over the past couple of years relative to other locations.”

Pam and Jeff Wilkinson, both 76, have five investment properties in Canberra that they have been holding on to as part of their retirement plan.

They are close to breaking point after a dozen interest rises have increased repayments on three mortgaged investment properties, with repair costs increasing alongside inflation.

Ms Wilkinson said it felt as if landlords were being unfairly targeted by governments.

“I think it should be a free market,” she said. “They rely on the private market to fill the gaps, so why are they targeting us? Why not people with shares? Most landlords aren’t rich.”

Ms Edwards said each property market was different and introducing rent caps and freezes might result in different outcomes. “It’s all to do with supply and the movement of migration, which is affecting the vacancy rate, which, yes, is probably pushing up the rents in some places. But there’s also a lot of other factors that affect the rent. Investors, they’re not going to sell their property at a loss, but they’re going to sell if the market is good and it’s improving at the moment.”