Tenancy law reforms haven’t stopped investors

Tenancy law reforms in New South Wales and Victoria have only had a small impact on landlords’ decisions to purchase or sell rental properties, according to new research.

A research paper from the Australian Housing and Urban Research Institute (AHURI), titled, ‘Regulation of residential tenancies and impacts on investment’, found only 14 per cent of investors nominated dissatisfaction with tenancy laws as ‘very important’ in their decision to sell.

While 50 per cent said they sold because it was a good time to realise capital gains, 47 per cent said they wanted money for another investment, and 36 per cent said the rental income was insufficient.

Senior Research Fellow in the City Futures Research Centre at UNSW Sydney, Dr Chris Martin said investors buy and sell based on personal circumstances more than rental laws.

“Overall, we found that Australian residential tenancies law reform has accommodated, even facilitated, the long-term growth of the private rental sector, rather than causing disinvestment,” Dr Martin said.

“The sector is dominated by small-holding landlords who frequently transfer properties into and out of private rental according to their individual circumstances and the wider housing market conditions. 

“The reality is the Australian private rental sector is built for both investing and disinvesting, and that’s what landlords do.”

According to Dr Martin, the private rental sectors in Sydney and Melbourne are dynamic, with a high churn rate of both rental properties and landlords, many of whom are ‘mum and dad’ investors.

Within five years of first being in the private rental market, a majority of properties in both Sydney and Melbourne are no longer in the rental market. 

In Sydney, 32 per cent of properties that first entered the private rental sector in 2000 were no longer in the private rental sector five years later and 44 per cent were no longer there 10 years later. 

In Melbourne, almost half (49.3 per cent) were no longer in the sector five years later, while 58 per cent were no longer there after 10 years. 

The situation is even worse for properties that first entered the private rental sector in 2015.

In Sydney, 54.7 per cent had exited after five years and in Melbourne 51.4 per cent had exited.

“As properties churn through the rental sector, renters get churned out of their housing,” Dr Martin said.

“This is a basic problem for people trying to make a home in rental housing.”

Dr Martin said around Australia, state and territory rental laws accommodate the dynamic nature of private rental investment.

“Landlords can access the sector easily because there are no licensing or training requirements,” Dr Martin said.

“And they can exit easily because tenancies can be readily terminated.

“There are, however, many differences between jurisdictions in the details of their laws.”

According to Dr Martin, it’s time for jurisdictions across Australia to pursue a new national agenda for residential tenancies law reform.

“There’s been virtually no national co-ordination of law reform processes, so divergences are opening up and some problem areas have gone unaddressed,” he said

“Some high-priority actions should include making tenancies more legally secure, clarifying landlords’ obligations regarding defective premises, and investigating contemporary rent regulation regimes to moderate increases in market rents.”

In the upcoming issue of Elite Agent Magazine, we take a deep-dive into the rental crisis currently gripping the nation, including some of the strategies that are currently being canvassed as a way to solve the problem. Get your free copy of the magazine by becoming an Elite Agent Pro member here.

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.