The overwhelming majority of investors are not wealthy property magnates flush with money, but regular mums and dads who are leaving the residential market because it’s just too hard, a leading property manager says.
Leah Jay Senior Property Manager Michelle McLean said the combination of increased mortgage repayments and strict rental regulations that are increasingly in favour of tenants, meant investors, most with only one or two properties, were selling up.
“At the end of the day, they’re having all these restrictions put on them and their mortgages are going up so much that it’s an affordability issue because they can’t increase the rents in line with the mortgages,” she said.
“We might get a property where you’ve got a rental increase of $50 a week, so it might be a 10 per cent increase or 20 per cent increase at the most, but it’s still not keeping up with the mortgage repayments, which are going up at twice that rate.
“Eighty per cent of them (investors) are mum and dad investors. It’s just taken for granted that they’re supposed to be the government’s prop-up for housing.”
Landlords looking elsewhere
Ms McLean said the idea behind changing the rental laws in NSW, or any state, was supposed to aid tenants, but in fact they were making the rental crisis worse as they are so onerous on landlords that they are turning to other forms of investment instead.
She said currently one landlord among Leah Jay’s 4300-plus rent roll was trying to sell their property with vacant possession but the tenant was refusing to move out.
“The purchaser is going to pull out of the property and the owner has a lot riding on that because they were waiting on the property to settle because they had a business arrangement attached to that,” she said.
“So if this purchaser pulls out, then he (the owner) defaults and there’s a flow on effect.
“So that particular owner, he’s being bitten by that situation and where would the encouragement be to go back into it (property investing) again?”
Ms McLean said the government needed to rectify this with tangible incentives for residential property investors.
“Whether or not it’s via additional tax breaks or funding, something needs to happen to make it attractive for an owner,” she said.
Rent bidding rises
The Real Estate Institute of NSW also said the NSW Government’s recent ban on agents engaging in rent bidding has had a counterproductive impact, with tenants now more aware they can offer above asking rent and many increasingly believe they must do this.
In NSW and some other states, agents cannot suggest tenants offer above the asking rent in order to secure a rental property.
However landlords can directly ask tenants to present their best offer, and tenants can proactively do so too.
Since the ban came in late last year, and the publicity it created, more tenants have been offering above the asking rent.
Ms McLean said the most significant increase in rent bidding was at the lower end of the market.
“We are seeing tenants competing for properties at the cheaper end of the rental market becoming increasingly desperate in their attempts to secure a home in an environment of such tight vacancy,” she said.
“They are pulling out all the stops and, in many cases, leaving themselves ever more vulnerable.
“In the Newcastle market, for instance, the lower end of the rental market can be loosely defined as up to $550 per week.
“It’s tenants vying for properties at around this mark who we’re finding are most likely to offer more than the asking rent, and it’s these people who can perhaps least afford to.
“These tenants may be competing for rental properties with owner-occupiers looking for short term living options, perhaps while they renovate or build, and who are typically better placed to outbid more desperate tenants.
“The situation will remain perilous until the government gets serious about providing more housing for people in the lower socio-economic demographic.”
Ms McLean said Leah Jay did what it could to assist that demographic of tenant, including working with Jenny’s Place to help find women and children who have been homeless or the victims of domestic violence a home.
It’s tough for PMs
She said the rental crisis was also tough on property managers who were often unfairly blamed for the situation.
“I don’t think it’s any secret in the industry that we’ve lost about 30 per cent of property managers,” Ms McLean said.
“The stress that they cop, the abuse, from both sides, is too much.
“Unless they’ve been entrenched and doing it (property management) for a long time they think, ‘I can go elsewhere and get paid better and not have to deal with the stress and abuse of it’.”
Ms McLean said her agency had multiple levels of support in place for their property managers, including a solutions panel where property managers report to a pod leader or senior leader so they always have a path of escalation and support if they experience any problems with a tenancy.
She said they also do fortnightly training on any new legislation or issues raised organically through a tenancy, so each property manager can learn from the experience of others.
“We’ve also got an EAP (employee assistance program), so if we do have staff that are struggling, they can obviously speak confidentially to the EAP as well,” she said.
“It’s about ensuring they feel fully supported.
Government must act long-term
REINSW Chief Executive Officer Tim McKibbin said with the NSW State Election coming up this Saturday, it was time for the government to think about long-term solutions to the rental crisis, not short-term, vote-grabbing.
“When politics is prioritised over policies, ceremonial moves like banning rent bidding for agents too often end up backfiring on consumers,” Mr McKibbin said.
“Banning agents from asking above the advertised rent has had no impact, as rent bidding was always driven by desperate tenants.
“But with increased awareness of the practice, more tenants have become switched on to the idea of offering over and above the asking rent.
“REINSW-member property managers across the state report that instances of tenant-driven rent bidding are increasing, because tenants know that they not only can, but in many cases, they must offer more up front.
“By the end of the week, we should have some clarity as to which party will lead the state for the next few years.
We implore whichever party that might be to dispense with short-sighted, ill conceived, vote-attracting policies and work with industry on a real and tangible suite of measures to address the housing crisis.”
If you’re a property manager or investor, you can have your say in the Rent Crisis Action Campaign at rentcrisisaction.reinsw.com.au.