Significant changes to residential tenancy laws passed through parliament this week heralding a strengthening of tenants rights as they relate to residential leases. The following key changes will impact residential tenancies:
- Tenants will be allowed to keep pets and the property owner will only be able to refuse in certain circumstances.
- Tenants will be able to make minor modifications to the property without permission from the owner.
- Tenants may take an owner to court if they can demonstrate the owner has acted with reciprocity against a tenant.
- Rent increases are limited to once annually.
- The process of bond disposals can be commenced by either tenant or landlord.
- Disputes will mostly be heard by the Commissioner of Consumer Protection rather than the Magistrate’s Court.
- Rent bidding will be banned.
Overall, the changes are moderate and align with tenancies laws in other states and territories. Importantly, the changes stop short of prohibiting ‘without grounds terminations’, a silly phrase used to describe circumstances where a tenant requests a further lease term after the end of a fixed term and the landlord refuses without giving a reason.
REIWA conducted a survey into this particular element of the tenancy laws with an astonishing 61 percent of the 6,000-odd landlords surveyed saying they’d ‘consider selling’ the property if ‘without grounds terminations’ were prohibited. Given a fixed term lease has a clear end date, neither party should anticipate that an additional lease or reversion to a ‘periodic lease’ is assured. You don’t have to give a reason to end a fixed term agreement in any other circumstance, even a marriage!
At a time where supply of rental homes are at crisis point across Australia, new laws that actively undermine the encouragement of supply risks further disincentivizing the main cohort of property investors; unsophisticated, family investors the majority of whom own one additional property other than their home.
Given family investors provide 9 in every 10 rentals in WA, we cannot afford to discourage them.
You might also be interested in
May 3, 2024
Rent Bidding
As recently reported in these pages, the West Australian parliament passed into law changes to the Residential Tenancies Act designed to further protect the interest of tenants. Some of the changes bring WA into line with other states where substantial changes have altered tenant-landlord relationships and, in some cases, have deterred investment and pushed up rents. Many of the changes will be relatively benign, such as rent increases limited to no more than every twelve months (currently it is a minimum of six months). None of the laws encourage investors to further supply rental stock by improving protections for landlords from tenants that breach the lease agreement and / or wilfully damage the property. One of the changes will be to make it illegal for a landlord (or their property manager) to encourage a tenant to offer more rent to secure a lease. Known as ‘rent bidding’, in a tight rental market it is common for tenants to offer more than the advertised rent for a property. It’s important to note that the ban will not prevent a tenant from offering more rent than advertised. In other states, rent bidding is already banned, but the outcome of the ban has failed to afford any additional benefit for tenants. In the current market, most properties receive multiple applications to rent with many tenants prepared to offer more than the asking rent to secure the property. Under the current arrangement, tenants will typically seek guidance from the leasing agent as to what constitutes market rental value and without specifying the details of competing applications, tenants are able to secure a lease by offering a modest amount above the asking rent. With a ban on rent bidding, tenants will be ‘flying blind’. The leasing agent will have to be silent on proffering any advice as to the level of competition, or where the market sees value. What has occurred in other states is tenants are offering substantially more than the asking rent because the leasing manager is unable to guide them where fair market rent might lie. I am told desperate tenants in NSW will offer 20% above asking rent where a 5% increase would have been sufficient. Already, property managers are advertising asking rents with a “From” in front. This makes it more difficult for tenants to determine fair market rent, especially once rental bidding is formally banned. Mostly, landlords are seeking quality tenants at a reasonable rent. Many will choose the best tenant over one offering the highest rent. Property managers have a duty to their landlord to secure the best possible lease outcome for their client and the rent achieved is but one component. Banning rent bidding will do nothing to further the plight of tenants already dealing with a highly competitive, stressful market of limited supply and rising rents. Governments should spend their time thinking about how they can get more rental supply into the market by actively encouraging property investors. Everything else treats the symptom not the cause and rents will continue to rise.
Apr 24, 2024
Boom or Bust
Perth’s housing value surged past the $700,000 mark last month with year-to-date price now at $703,502. According to Core Logic, that puts us closer to Adelaide’s $734,173 but still behind Melbourne ($778,892) and Brisbane’s $817,564. Sydney’s nation leading $1,139,375 seems a long way off, but in the years 2006-2009, Perth’s and Sydney’s dwelling values were aligned around $465,000. Perth’s home values have increased 19.8 percent for the twelve months to March. Perth’s last strong market showing was back in the years 2012 – 2014 where housing values peaked at $518,737. Fuelled by the mining-construction sector which saw around 1,000 people per week flood into the state to take up high paying jobs, this boom came to an end when many of these workers returned home, limiting demand for housing. It took Perth from July 2014 to April 2021 to regain the 15.3 percent fall in housing values after prices fell to $440,841 in July 2019. From that trough to current peak, a span of less than five years, Perth’s property values are up by 59.6 percent. Greater Fremantle has put on 20.8 percent over the past twelve months. The current market is being fuelled from the bottom up. The top five performing local government areas in Australia are in Perth’s more affordable areas including Armadale, Gosnells, Rockingham and Kwinana. A two-bedroom duplex half recently listed in Rockingham is asking $449,000 sold three years ago for $260,000. The agent tells me she had offers site-unseen over $500,000 already. That’s a 33% gain over the past three consecutive years. These are worrying signs for our market. Perth has long been known as a ‘boom – bust’ market with strong gains normally tied to a specific event – a mining industry boom, for example - followed by a strangled demise afterwards. The boom years of 2004 to 2006 were testament to that when Perth put on 40.6 percent house price growth in 2005 only to be back where it started a year later. The question is, will this time be different? Whilst the pace of property value gains is following a similar pattern to previous booms, this time its is predicated on three major factors: Population growth, low supply and relative affordability and not a mining boom. Our quarterly change in population shows more than 20,000 arrivals, well above the long-term average. Core Logic’s analysis of monthly listing volumes shows inventories are at about half the decade average and, as already demonstrated, Perth remains more affordable than most of the nation’s capitals. These elements, underpinning Perth’s current market gains, will ebb and flow in the coming months. However, with supply levels still low and migration levels strong, the only thing likely to arrest this current trajectory in the short term is affordability and until our house values reach the early to mid- $800,000’s it seems unlikely affordability will impinge on potential future gains.