Dear Sir /Madame - Amazon S3



Dear Sir /Madame:

Re: RTA Rental review (Regulation of property condition / rights & responsibility of landlords & tenants individual submissions).

I am a landlord of ~40 years (hard work, sacrificing health &time) with properties thought out the western suburbs of Melbourne.

Investing in established suburbs with lower start up capital cost, but requiring higher maintenance / repairs. Rent varying range $150-$390 per week (predominately lower socioeconomic status renters).

The properties are established homes in established suburbs, built dates from 55yrs to 150years old. (No Air con , no dishwashers, wall heating only ( no central heating) low pressure water piping, no wall insulation, signal glassed windows, Laden plaster wall & ceiling etc..)

The homes are all well maintained but require huge (ever increasing) up keep expenses.

Older homes are inherently, hotter in summer / colder in winter with normally higher energy costs, damp & drafty. But highly sort after due to central location (close to city & local amenities).

If there is a minimum standard (property condition) with large increases in costs for refurbishment, these older homes on VERY expensive land will be sold to top end owner occupiers &/or subdivision developer.

There is no future incentive to invest where expensive land (site value) / low capital improved (CIV) older established housing. (Off course these are most sort after low rental properties available). This type of property is typical of ~39% of Melbourne’s rental stock! Thus creating a shortage in diverse rental stock.

Reasoning why divesting / selling will occur (older established housing stock):

1. Huge up keep & maintenance costs

2. Outrageous Land Tax impost.

3. Prohibitive higher Council Rates.

4. Higher mortgage / interest costs (investment loans interest rate now increasing)

5. No capital depreciation / write offs (new properties only)

6. Higher supervision: complaints & management time / commitment by Landlord.

7. Weather / element & pest ingress (weather board homes).

8. Very poor rent return on capital, lower negative gearing benefits. Higher servicing out goings (out of pocket costs)

9. High Investment risk, heavily reliant on capital growth, coupled with Federal Labor’s policy of increase CGT & abolishing negative gearing on established homes.

10. Higher insurance premiums. No structural / fittings warranty period.(as new homes 7yrs)

11. RTA Rental review , more tenant rights & less landlord control.

12. Better investment returns: Commercial / retail property, SMS, Blue chip stocks & bonds.

Please note most investors (individuals) are hard working, moderate, conservative & market reactive people, we gravitate to high returns, low risk with minimal headache! Older established housing stock will do not fall in these categories.

Government disincentives:

All councils (including rural) have been instructed by Valuer General, State Government (SRO: state revenue office) to no longer conservatively value properties, but to be " on maximum or peak market value"  A two yearly valuation now has no room for any monthly or yearly down ward valuation.

This SRO directive is to maximize LAND TAX valuation & increase general government revenue.

Centering taxes on House valuation is erroneous, as a single person (possibly elderly)  in a expensive home uses far less council / government resources, e.g. local library, swimming pool, parks & gardens play grounds,  rubbish collection, parking, less health services (immunization,. maternity care etc..), will pay more than a large family in a low value home, How is this fare?

Expensive houses do not equate to higher income nor increase service usage, number of people in a house does.

If you fix or paint your rental house (increasing its value) you get rewarded by your rates & land tax also increasing.... go figure?

Increases in land tax will create ghettos / slums (violent / antisocial / drug infested) lower socioeconomic areas, e.g. Sunshine, Laverton /Brooklyn St Albans etc.. More expensive suburbs attract predominantly owner occupiers & have fewer rentals (due to poor returns on capital higher taxes). This can be verified (.au) by number of rental property per capita: Sunshine area approx 300+ rentals compared Malvern / Glen Iris : 88 rentals (same population).

Regardless higher taxes will always be passed onto the renter. If you want long term rentals @ lower costs you must reform the property tax system (Land Tax, Rates, Fire service levis etc..). Government's cannot keep increasing taxes above average yearly earnings & /or CPI .

On a secondary issue if you remove negative gearing governments must be prepared to inject considerable more public housing stock. (Again grouping high density lower social housing will create ghettos; while private rental housing stock is suburb/ social diversified)

Note once governments provide new housing stock, yearly maintenance / repair costs will extremely high compared to private costs (due to very poor respect for public property & inflated repair costs).

Thus total land tax collected will be a drop in the ocean compared to future government public housing expenditure!

Councils & governments must change to a more equitable property tax system or the future homeless & antisocial issues will demand your attention & escalating revenue.

You will not determine housing matters in isolation (State issue), Federal & Financial market are also influences.

Tread carefully; the most livable city’s future is in your hands.

Kind Regards

Ross Rose

5/2/2017

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