History of Residential Property Investment in Western Australia

  • 1939
    • Rent control introduced by the Federal Government with the enactment of the National Security (Fair Rents) Regulations 1939 which empowered State Governments to freeze rents and establish Fair Rent Control Boards.
    • Increase of Rent (War Restrictions) Act passed by the Western Australian Parliament.
    • Fair Rents Board established.

 

 

 

  • 1947
    • State Housing Commission formed.
      • Tens of thousands of houses built by the Commission over the following decades.
      • Many property investors will subsequently purchase these properties second-hand, refurbish and rent them out.

 

  • 1948
    • National Referendum on Rents and Prices.
      • The Federal Government attempted to increase its power over the States in regard to rent and prices.
      • The Referendum question was “Do you approve of the proposed law for the alteration of the Constitution entitled ‘Constitution Alteration (Rents and Prices) 1947’?
      • National Referendum held on 29 May 1948.
      • The Referendum was defeated with No receiving 59% of the vote and Yes receiving 41%.

 

  • 1950
    • State Government control of rent amended:
      • Properties rented prior to December 1950 could increase their rent by 20%
      • Rent controls removed on houses rented after December 1950.
    • Mrs S Williams of Midland Junction reports that the Fair Rents Board provides “courteous and helpful advice“.

 

  • 1951
    • State Government control of rent amended:
      • Rent ceiling increased by 10%.

 

 

  • 1960’s
    • Deep sewerage becomes widespread in Perth as septic tanks are decommissioned and connection made to the public system.
      • The connection to deep sewerage becomes important later for higher density development of the existing suburbs.

 

  • 1970’s
    • High inflation linked to rapid price rises in housing and rents.

 

  •  1985
    • Negative gearing was abolished by the Federal Government.
      • Supply of rental properties on the market reduced and rents rose significantly.
    • Capital Gains Tax was introduced by the Federal Government.
    • Depreciation and capital works allowances created to allow a tax deduction to rental property owners for the decrease in value of their property over time.

 

 

 

  • 1990
    • High levels of rental stock and lower tenant demand combined for a record high vacancy rate in Perth and long lease out timeframes.

 

  •  1990’s
    • Zoning for residential land was increased in density across many Perth suburbs, sparking an ongoing wave of infill development, subdivision and move towards smaller blocks and houses.

 

  • 2000
    • First Home Owners Grant introduced by the Federal Government and administered by the States.
      • The Grant made it easier for people to purchase their first home rather than rent.

 

  • 2001
    • Goods and Services Tax introduced by the Federal Government.
      • Residential rental properties are input-taxed, meaning that many of the costs of owning a rental property have 10% tax added and no refund of the tax can be claimed (unlike most other businesses).
      • There is a modest inflationary effect on house prices due to the increase in building material and other input costs.
    • Stamp Duty abolished on residential tenancy agreements.
      • Property owners and managers save time and money by no longer having to take leases to the court house to get stamped and pay the tax.  Furthermore rents are more evenly distributed instead of being clustered under $125 per week which was the threshold for stamp duty.

 

  • 2004
    • Asbestos banned for manufacture and use, but remains as a legacy issue in most existing housing stock built prior to this date.

 

  • 2007
    • Perth median house price peaks at close to $500,000.

 

  • 2008
    • National Rental Affordability Scheme commenced by the Federal Government.
      • Tax incentives for investors to buy newly-built rental property and lease it at below-market rents.
      • The abundant money in the scheme and associated development and marketing lead to corruption and malinvestment.

 

  • 2009
    • Home Insulation Program launched by the Federal Government.
      • Many property investors take up the offer of free roof insulation.
    • Hard-wired smoke detectors in residential properties become compulsory.

 

  • 2012
    • Rental shortages due to tenant housing demand from the mining employment boom across WA.

 

  • 2013
    • Updates to the Residential Tenancies Act 1987 and Residential Tenancy Regulations 1989.
      • Documentation requirements increased for residential tenancies.
      • Tenant rights enhanced significantly.
      • Residential tenancy databases (blacklists) lose their power as tenants have the right to object to listing, cannot be listed until after their tenancy ends and notice given, and defaulting tenants are removed from the database after three years.
      • Fines for non-compliance by rental property owners.

 

  • 2014
    • Start of a five year decline in the Perth rental market due to lower tenant demand.

 

  • 2015
    • Land tax rates increased significantly by the Department of Treasury.
      • Land tax now becomes the highest operating expense for owners of large property portfolios.
      • Some investors sell rental properties as the combination of falling rents and high tax reduces investment viability.

 

  • 2016
    • Credit cycle begins to tighten as lenders fear over-lending to the residential investment sector.  Investors find it increasingly hard to get a loan to buy a property, to develop, or to re-finance, in particular for interest-only loans.

 

 

  • 2018
    • Fencing material Hardifence ceases production, leading to delays in fence replacement and increased costs for owners who need to replace entire fencelines with Colorbond, the alternative fencing material.
    • Methamphetamine use and manufacture rises across WA, with rental property owners being affected with high clean up costs.

 

  • 2019
    • Perth rental market shows signs of strength, vacancy rate falls.
    • Family violence changes proposed to Residential Tenancies Act 1987.
      • Tenants affected by family violence will be able to exit leases.
      • The laws will shift the financial burden to a tenancy of family violence from the tenant to the property owner.

 

Smoke Detectors

Let’s talk about smoke detectors. As conscientious landlords you already knew that all residential properties require hard-wired smoke detectors. Battery-operated smoke alarms are not sufficient; although there are some specific exemptions for the use of long-life battery alarms where properties do not have ceiling access. The hard-wired smoke detector requirements have been law since 1 October 2009; and all your properties should comply. If you lease a property without complying smoke detectors, you are taking a great risk if a tenant should be injured or killed in a fire; not to mention possibly jeopardizing any insurance claim. You probably also knew that if your house was larger than a 3×1, you likely need 2 or more hard-wired smoke alarms. I find the legislation vague on how many are required for a specific-sized house, and leave it up to the experts to determine when they are on-site at a property. Because you manage your properties carefully, you likely also know that hard-wired smoke alarms have a 10-year life; which means that they need replacing every 10 years. If your properties are 10 years or older, make sure you check the expiry date which will be displayed on the smoke detector. As a proactive landlord, you carry a tool box and common spare parts in your car, which include a new 9V battery. You certainly make sure that you replace the smoke alarm backup battery on the 1st of April every year; which is why you also put a step-ladder in your car around that time. With the eagle eye of Sherlock Holmes, you inspect your properties regularly (although for routine inspections not more than 4 times in any 12 month period – s 46(3) of the RTA). If you notice a smoke alarm and it’s green light is not on, or it’s lid is open, you investigate further. If the tenants says “Oh, we open it because it goes off all the time” you do NOT say “Okay”, instead you arrange for an electrician to repair or replace the unit. Since you monitor the media, you are aware that the 2014 edition of the Building Code of Australia now requires that smoke alarms are interconnected within a property. Fortunately there is no requirement to retro-fit older houses at this stage, but give it time! Buildings approved for construction from 1 May 2015 onwards must have interconnected smoke detectors before renting or selling. There are companies that specialize in smoke detector checking, they could be a worthwhile investment. Alternatively, what I do is whenever I have an electrician attend one of my properties for a repair job, I get them to check both the electrical safety switches and hard-wired smoke detectors and issue me a fresh Electrical Safety Certificate confirming the safe operation of these devices. Smoke safely and sleep soundly.