Brisbane landlords, Brisbane's future & new infrastructure, Brisbane's rental market, Brisbane's sales market

Brisbane landlords: life as a property investor is about to get tougher

Our real estate agency is a vibrant and positive place. We’re definitely glass half-full kind of people. But our business is built on serving property owners including many Brisbane landlords, and right now it’s hard for them to love their investments. And it’s hard for us to paint an optimistic picture. Rents have dropped over the past 3 years while expenses have risen; values have fallen (apartments) or risen only slightly (houses); interest rates are flat but many of us have been forced to make extra principal repayments on our loans. Landlords’ net returns have almost all dropped and there’s been little to celebrate.

And positive as we are about the future of this magnificent city, and especially real estate in the inner-city, there are powerful forces about to make things tougher for Brisbane landlords.

Open Doors to Renting Reform” is the state government’s current program to tip the legislative scales firmly in favour of residential tenants in Queensland. The ‘consultation’ (we’re being generous calling it that), was headlined recently with the suggestion tenants should be able to keep pets without landlord consent, and plenty of you had a view on that. But there’s lots more in this review that’s raising concerns for Brisbane landlords including the idea that a tenant should be able to stay in a property for as long as they like. There’ll be limited grounds for termination – rent breaches for example, or if you’re selling or moving back into the property. But what if a landlord decides they’re just not happy with the tenants for regular late payments, lack of care for the property etc? Too bad. Unless they actually breach the agreement, you’re stuck with them.

This isn’t a new policy brain-snap, with the idea floated then shelved in 2012 and again in 2016. And we want to be really clear in saying this: landlords (and their property managers) want good tenants to stay long term. Tenants’ advocates like to argue that agents encourage changing tenants because we get a fee when that happens. But the work involved, the vacancy (when we get no income) and risk of losing a client all far outweigh any benefit to us. A happy tenant who stays long term, pays their rent and takes reasonable care of the property is by far the best outcome for everyone.

If you wanted to make marriages work better, would you outlaw divorce? That’s what the Housing Minister is proposing, arguing that a landlord’s right to end a tenancy should be limited. Landlords, he says, sign a “social contract” when they put their property up for rent, offering it to tenants with apparently far more non-commercial obligation than any of us expected. Are we really there to do the government’s job and house tenants we don’t want?!

You can weigh into the public debate and provide your own submission by November 30th. We will be. But we expect the government will push ahead regardless – pets allowed, no ending tenancies without grounds, tenants able to make cosmetic changes to the property without consent. The list goes on. Landlords should brace yourselves.

Now to the Federal Labor policy to remove negative gearing (other than on new properties) and halve the capital gains tax discount. Importantly the ALP say current investment properties will be excluded from the change until sold, but it’ll be a huge change in the financial decision on investing in real estate. Borrowing to buy is getting harder; the cost of holding/owning a property will go up significantly if the ALP take office; and if you achieve what we all aim for – growth in the asset value to help fund your retirement – you’ll pay more of that profit in tax.

Brisbane property managementOne insider described this today as “the perfect storm for property investors”. State and federal policies combining to raise your risks and diminish your returns. Add to this we have a Brisbane market that may be some time away from worthwhile price rises. Those Brisbane landlords who’ve been on the fence about holding their investments are starting to head for the exits. This might well be a defining point in time, when only the seasoned and determined landlords stay the course.

Others will naturally see this as a buying opportunity. If you secure an investment property before Bill becomes PM you’ll be able to keep it negatively geared. And many share our optimism on inner-Brisbane’s future. The scale of the major projects to be completed in the next 5 years is phenomenal (including Queens Wharf $3.6b; Cross River Rail $5.4b; Brisbane Metro $944m; Brisbane Live $2b; Second airport runway $2b) We’ve already seen growing interstate migration and if that continues Brisbane may be entering a ‘golden age’.

Brisbane landlords have decisions to make. Sell up or hold on? We’d love to hear what you think.