Property investors often claim they are increasing the supply of rental housing, but this statement requires clarification. Are these investors financing the construction of new rental properties, thereby adding to the overall housing stock? Or are they purchasing existing owner-occupied homes and converting them into rentals, which reduces the number of homes available for ownership? This distinction is crucial in understanding the impact of their investments on the housing market.

For example, consider a scenario with 16 existing owner-occupied properties. If an investor buys four of these homes and turns them into rentals, they can claim to have increased the rental supply by four units. However, the total number of properties remains at 16, and the number of owner-occupied homes decreases from 16 to 12. In contrast, if the investor builds four new rental properties, the total housing stock increases to 20, preserving the number of owner-occupied homes.

Recent data from the Australian Bureau of Statistics highlights the ongoing challenges in Australia’s housing market. In the September quarter, finance commitments to residential property investors made up 40.6% of all housing finance commitments, the highest level since mid-2017. Notably, 83% of these commitments were for purchasing established homes, raising concerns among economists.

Independent economist Saul Eslake pointed out that while investors may feel they are contributing to rental housing supply, their actions do not increase the overall housing stock. He stated, "These purchases do absolutely nothing to increase the overall supply of housing: and while they do increase the supply of rental housing, they increase the demand for rental housing by an exactly equal amount — by outbidding would-be owner-occupiers."

Eslake emphasized the need for government action to address these issues. He suggested that governments should reconsider the tax concessions available to investors who purchase established properties. Instead, these incentives should be directed toward those who build or buy new properties, thereby genuinely contributing to the housing supply. He noted, "Doing so would probably encourage more investment into increasing the supply of rental housing, as opposed to pushing up the price of the housing we've already got."

The discussion on Eslake's LinkedIn page sparked further debate. Macquarie Law School professor Cathy Sherry expressed skepticism about maintaining tax concessions for new builds, citing concerns about the quality of these developments. She remarked, "We've been doing that for decades and look where it has gotten us — a housing crisis."

As the housing market continues to face challenges, the quality of new rental properties also comes into question. Consumers are increasingly wary of purchasing off-the-plan apartments, especially with reports of defects in Sydney's building developments. Industry stakeholders assert that new laws are in place to protect prospective buyers, but concerns remain about the overall state of the housing market.

In summary, while property investors may claim to be increasing rental housing supply, the reality is more complex. The distinction between purchasing existing homes and building new properties is critical in understanding their true impact on the housing market. As discussions continue, the need for effective policy changes and quality assurance in new developments remains paramount.