Page 206 - Week 01 - Wednesday, 15 February 2012
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Let me come back to the comments that were made about the legislation earlier. Mr Corbell made an interesting speech. I disagree with many of the points that he made, but I appreciate that he put them in a considered way. The whole line of questioning about whether rents will go up under this kind of legislation is an interesting one. I think that is a very debateable point. Certainly the advice we have been given is that rents will be what the market can bear. That is why we are seeing rents go up so much in the ACT at the moment: people are charging whatever they think they can get. I think that that is the real factor here. There has been a lot of discussion about what will drive the rents up—that landlords will have all of these costs. There are a whole series of factors going on here.
There was some talk about why we had not provided modelling. What we provided when we put this legislation forward was a significant background paper. In that background paper we identified a range of the likely costs that individual properties might face. But we know that nobody actually knows the data on the state of properties in the ACT. There is not a singular tally of the energy efficiency rating of every property in this territory. That comes through in the government’s own data on ACT government housing properties. It does not actually know. So for us to produce modelling would have been guesswork, just as the government has undertaken an exercise in guesswork. And that is all its modelling is—an exercise in guesswork.
If you actually look at the rental market and the style of properties that are available, there is a whole range. And there is a range of types of landlords out there. There are going to be landlords, often investors, who have just bought a brand-new six-star rated apartment, say in Lyneham or anywhere else in the inner north. That person is probably going to have a huge mortgage, because there is a fair chance that they have borrowed nearly 100 per cent of the property, but they do not have change to their cost structure, because their house is six-star energy rated and it is going to have most things already. So they are not going to need to change their rent at all.
At the other end of the spectrum, probably similarly in the inner north, suppose you have got a zero-star rated house that has been there for a long time: it is old; it is one of those classic Canberra nasty houses; it has been owned, perhaps, for 25 years. The owner has long since paid it off; they have no cost structure other than actually keeping the property and probably gaining a significant capital advantage every single year, as we have seen the way the ACT has run in the last few years.
Let us look at what would happen if they had to put, say, $5,000 of upgrades into their property. And suppose they are renting it out at $450 or $500 a week. That is pretty standard, if not a bargain, in the inner north. That is 10 to 12 weeks of rent to cover those upgrades. The property has had an increase in its capital valuation because of those upgrades. Out of the non-existent cost structure—there is land tax and there are a few other bits and pieces—it is 10 or 12 weeks of rent to offset those upgrades. And now we have got a tenant living in a decent quality property and the landlord has got a better property when they come to put it on the market.
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