REINSW believes there is an urgent need to challenge the Minister for Better Regulation and Fair Trading on this approach and CEO Tim McKibbin welcomes the opportunity to issue this challenge.
It’s common ground between all stakeholders that we need more residential rental property. According to Real Estate Institute of NSW CEO Tim McKibbin, those that have given the problem some thought quickly realise it’s not a chicken and egg question.
“Before someone can be a tenant, another person needs to invest in the residential rental market,” Mr McKibbin says.
“It’s important to recognise that someone with the resources to make an investment has numerous options, all competing for the investor’s money. Shares, fixed interest, offshore opportunities, managed funds, superannuation, holiday and short-term rental, commercial and industrial property are all competing with residential rental property.
“For the residential rental market to attract investment money, it must be better than its competition. Additionally, for the funds currently invested in the residential rental market, it must remain the most attractive investment option.
“Through the reforms he is pursuing, Mr Anoulack Chanthivong, Minister for Better Regulation and Fair Trading, has a plan to drive additional investment into the residential rental market.
“In essence, the Minister’s plan invites an investor to buy a residential rental property, pay the Government stamp duty, for the Government to then tell the investor what they can and can’t do with their property,” Mr McKibbin explains.
Highlights of the Minister’s plan:
The Landlord must allow the Tenant to have a pet(s).
The Landlord can’t ask for an increased bond to restore their property to its pre-pet damage condition.
Ban on no grounds eviction. If the Landlord wants to recover possession of their property they will need to satisfy one of the reasons determined by Government.
If the Tenant challenges the validity of the Landlord’s reason to recover possession of their property, then the Landlord will need to go to NCAT with evidence in support of their reason. For example, let’s assume the Landlord lives in a regional area, and needs treatment for cancer in Sydney. The Landlord wants possession of their Sydney property and gives the Tenant 90 days’ notice. If the Tenant alleges that the reason is not genuine, then the Landlord will need to provide evidence in Court in support. In this case, presumably something from the Landlord’s oncologist.
Rent Control:
i) The Landlord will only be permitted under the reforms to increase the rent once a year.
That increase needs to be reasonable, the Tenant can challenge the reasonableness of
the increase at NCAT.
ii) Government has become increasingly concerned with the escalating cost of rent. A ban
on rent bidding and other market control measures in play and under active consideration will ensure that the rent payable is acceptable to Government. This means the rent payable will be less than what the market is prepared to pay.
If the Tenant wants to walk away from the lease agreement, they can, by paying a “break fee” determined by Government.
If the Tenant abandons the property and leaves behind items, for example:
i) For example, banking records, Passports and the like - the Landlord is required store
those items securely and return them to the Tenant when requested.
ii) Furniture, the Landlord pays for the removalist/storage fees and then try to recover the costs from the Tenant. If the Tenant doesn’t want their furniture, then the Landlord needs to get an order from NCAT for the disposal of the furniture.
Both Landlords and Government agree that there must be no impediment imposed on a Tenant who is at risk of domestic violence escaping from that environment. However, if there is rent owing and/or the property has been damaged, then Government believes that it is appropriate that the Landlord bear those costs, rather than Government.
If the Landlord lives interstate, then NCAT doesn’t have the jurisdiction to hear disputes. In these circumstances Government suggests going to the Local Court. However, this is an expensive and time-consuming option, so it’s a commercial decision whether or not it’s worth pursuing the outstanding rent, damage to the property etc.
Landlords will have no bond security at the commencement of a tenancy under the Government’s portable bond scheme. Two landlords will have one bond which covers two tenancies. They will have a competing financial interest in the same security and their only recourse is to terminate if the bond isn’t paid without any way to recover tenancy-related costs.
Mr McKibbin says the Minister’s plan must address declining growth in the number of properties available for rent.
“We know that growth in the number of rental properties in the market has been decreasing. Alarmingly, the growth went negative in May this year - for the first time in the market’s history!” Mr McKibbin says.
The number of bonds held by the NSW Rental Bond (2023)
April: 961,946
May: 961,225
June: 961,471
July: 962,550
The number of bonds held by the NSW Rental Bond (previous years)
December 2022: 954,438 + 1.025%
December 2021: 930,787 + 1.009%
December 2020: 921,932 + 2.32%
December 2019: 900,988 + 3.88%
December 2018: 867,310 + 4.10%
December 2017: 833,783
Nb: Each rental bond held effectively equates to one residential rental property.
“This is all about renters,” Mr McKibbin says.
“Remember, investors can choose to put their money anywhere. Let’s hope the Minister’s 10-point plan will drive investment back up to the 8% growth required to accommodate the existing demand and the thousands of new people coming into NSW each month,” he says.