REA Group suggests more property investors are needed

The latest REA Group Property Demand Index for March 2017 found that there is little relief in sight for buyers and renters as demand continues to surge across most Australian capital cities.

“Continued unaffordability in our big cities in the buy market is forcing people to turn to renting and just like in the buy market, it’s abundantly clear that supply of rental housing has not kept pace with demand,” REA Group chief economist Nerida Conisbee said.

“Based on high levels of demand on the rent section of realestate.com.au, the current number of property investors in Australia are unable to adequately provide enough rental properties,” Ms Conisbee said.

“The negative gearing debate continues to heat up, but the incredibly high levels of rental demand suggest that any changes to the way rental housing is provided in Australia needs to be carefully considered.”

If negative gearing is taken away, Ms Conisbee believes there may be less investors in the market, which could lead to a sudden drop in available rental housing.

“The upside is that it could also slowly moderate the rate of house price growth in our most unaffordable cities.”

The REA Group index found that demand for property hit another record high in February 2017, suggesting strong price growth will continue and the affordability crisis in Sydney and Melbourne will only become more apparent.

Ms Conisbee said people will continue to be priced out of the market and pushed to urban fringes, smaller dwellings or continue to rent.

“In all states, buyer demand increased over the month, even in the relatively subdued market of Western Australia. It is still too early to say whether the West Australian market has reached the bottom of its cycle with year-on-year declines still apparent,” she said.

“Tasmania continues to be the strongest market, attracting interest from local buyers, as well as buyers from interstate and overseas, while NSW and Victoria are still attracting very high levels of interest.”

[Related: Analysis: The investor lending dilemma]