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19. Won’t this result in rents rising?

19. Won’t this result in rents rising?

Answer

No, rents stabilising along with the price of houses, and falling in real terms as incomes rise. Rents can’t just be jacked up by landlords at will or because their costs go up, demand falls away. Otherwise it would already have happened. 

So if landlords face an increased cost – as some but not all by any means will, they could seek to recover by ramping rents but to the extent that tenants are already paying as much as they can, demand will simply drop. 

I would expect the price of those properties to suffer to the extent that the landlord is then making at least the minimum deemed yield.

Showing 3 reactions

  • Peter Sedgeman
    followed this page 2016-12-16 08:41:21 +1300
  • James Turnbull
    commented 2016-12-07 23:07:54 +1300
    Not even a coherent economic theory to be found here.

    When there’s a housing shortage and people are sleeping in their cars because they can’t find or afford rentals then the competition for homes drives up prices and landlords do in fact do their share of jacking! Its a vicious circle …

    And, if a landlord were say also running a seperate building company it’s fairly easy to jack up expenses so the profits appear in a different entity – if at all.

    So what happens if ( acc to your theory ) a landlord has 1 million invested in two rentals

    He has to pay tax on the profits and, if I understand properly is also assessed on the notional RORI ?

    Then the market falls and the property is only worth ( sale value ( say 800K … )

    What is tax assessment to be based on ?
  • Oliver Krollmann
    followed this page 2016-12-07 10:27:21 +1300