9 Jan. 2007

Spruiking rental hikes

OK, could someone explain this to me?

Through the roof: rents to soar 20% from smh.com.au today. The reason rents are supposed to soar is because people are taking money out of property investment and putting it into superannuation. I don't understand how this is supposed to make rents rise at all. Presumably the implication is that the supply of rental properties will diminish with rental landlords selling properties. However, it seems that the only parties they will be able to sell to are either other landlords or renters who want to get on the property ladder; indeed the most obvious implications of people getting out of property is for property prices to fall, reducing the demand for rentals by increasing the affordability of home ownership.

A more plausible argument in the article is that the decline in new house-building in Sydney will lead to rental rises. However, this decline is more or less matched by a decline in the growth of Sydney's population, meaning that that argument too is bullshit.

OK, assuming I am right about the vacuousness of this article, how do we explain it? Journalistically, the answer is obvious: the SMH wants to sell papers, and Sydney is obsessed with properties. Large numbers of people on the way to work today will see a headline announcing a 20% hike in their rents and buy the paper to find out what the fuck is going on.

There is another agenda of course, one in which much of Sydney has been investing heavily for years, indeed one on which much of Sydney's prosperity is based: property prices. By claiming that rents will rise enormously, a big impetus is given to the buy-to-rent market, thus indeed invalidating some of the article's own claims!