Rental markets are steadily tightening across Queensland. These tighter markets will be faced with a double impact of rising rents and falling supply if Labor’s proposed changes to negative gearing push through, according to Real Estate Institute of Queensland (REIQ).

The industry group said that according to its rental market analysis, it is not the right time for the state’s rental markets to change the negative gearing benefits for investors.

Fifty-three of Queensland’s rental markets were classified as tight in March 2018, but a year later, the figure jumped to 63%. The result indicates that supply is not keeping pace with demand in a state known for having one of the highest rental states in the country.

The market needs additional supply in certain pockets, but the proposed changes to negative gearing are designed to remove incentives for landlords and diminish the supply to the rental market, according to REIQ CEO Antonia Mercorella.

“This could potentially be disastrous for parts of our rental market. The Labor Party’s policy is – by their own admission – specifically designed to remove investors from the established housing market,” she said. “This couldn’t happen at a worse time. We need incentives that will bring new investors to the market, not disincentivise them.”

REIQ said that renters would bear the brunt of the impact. Rents are already rising due to tightened conditions in many markets, and the consequence of the proposed changes to the negative gearing policy will likely be to worsen increases in some markets, REIQ said.

The industry group found that 17 of the 32 rental markets analysed were tight in the March quarter of 2018. This grew to 20 markets only 12 months later, in 2019.

There were eight healthy markets In March 2018. The number grew to nine in 2019. The greatest change came in the weak markets. Seven markets were classified as weak in March 2018 (vacancies greater than 3.5%), and a year later that fell to just three markets.

“In Queensland, 34% of us rent our home, and with continued population growth, we clearly need additional supply. The state stepping back from public housing in Queensland which means the load falls to private investors,” Mercorella said.