Property Hub - Investment Insights & Inspiration - Realty Talk - Are rental reforms helpful or harmful?

Episode Date: June 8, 2024

Just this week we were told that Brisbane now has the second highest median house price in Australia.  We devote time today to rental affordability as we search for a solution and Bushy has two outstanding guests to help us do that.  Firstly we turn the spotlight on THE most expensive state to rent or buy - New South Wales as we talk to Jo Natoli, the Founder of The Rental Specialists in Sydney, a 30 year veteran and current Real Estate Institute of NSW Board Member.  Then Bushy’s next guest takes a look at the raft of rental reforms in South Australia with award winning Senior Property Manager, Mariah Brierley from LJ Hooker in Adelaide’s Eastern suburbs. Subscribe for free to Realty Talk on the Property Hub channel, join our community and get more insights here: https://linktr.ee/propertyhubau Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media.See omnystudio.com/listener for privacy information.

Hello once again and welcome to this week's talk show. Well just this week we were told that Brisbane now has the second highest median house price in Australia. Living in Brisbane I can attest to the fact that the pain is real. And while we don't rent, we're fortunate enough to own our principal place, I can see the level of homelessness and can only imagine the struggle and the pressure that tenants must feel every day. We're going to devote time in this week's show to continue to search for a solution. And Bushy has two outstanding guests to help us do just that this week. Firstly, we're going to turn the spotlight on the most expensive state to rent or buy in Australia.

That's New South Wales. As we talk to Joe Natoli. Joe is the founder of the Rental Specialists in Sydney. We've spoken to Jo on previous shows. She's also a 30-year veteran and current Real Estate Institute of New South Wales board member. And then Bushy's next guest takes a look at the raft of rental reforms in South Australia as we speak to award-winning senior property manager Mariah Briley from LJ Hooker in Adelaide's eastern suburbs. But just before we start, I want to thank our supporters and our content partners, Realty.com.au, BMT Tax Depreciation, Know How Property Finance, Get Rare Property and

Apera Marketing. Now, if this is your first time with us, a big welcome to you. I hope you enjoy the show. You're going to find us on all podcast players and also through the Southern Cross Austereo Network. If you like the show, please hit that subscribe button and help us to continue to bring you the best guests every week. And don't forget, too, you can join the conversation anytime on Facebook by simply searching and finding the Property Hub Collective. We'll be back in just a moment to start this week's show.

property deductions can save you thousands of dollars each year to make sure you maximize deductions you need to work with the most experienced quantity surveyor in the country bmt tax depreciation is the leading specialist in the industry they've completed over 700,000 tax deduction schedules for residential investment and commercial properties australia-wide bmt guarantee to find double your fee in the first full financial year deductions call bmt on 1-300-728-7222 six today for an obligation free quote. Realty Talk and your host, Bushy Martin. Now it seems that the housing and rental crisis across the country is in the midst of a bit of a perfect storm. Migration at record levels adding to rental pressures, the increasing

severity and frequency of extreme weather events forcing many out of their homes, new property construction is at record lows and housing costs and flow on rents are at record levels. All this at a time when governments around the country are introducing ever more restrictive ways of residential tenants reforms that have growing potential to further pull investors and rental stock out of the market. And nowhere is this more prevalent than in New South Wales. So in our continued property management feature series, we want to get to the bottom of what's really happening on the ground in the primary estate, given the deluge of harebrained headlines and reactive half-baked solutions that are being suggested about the topic

with a specific focus on the details of rental reforms and the flow and effects this may be having on property and rental conditions. And there's no one better credentialed and positioned with their sleeves rolled up in the trenches to discuss this than our guest and specialist property investment manager, Jo Natale. And I did pronounce that wrong, Jo. How are you? I knew I would do that. I know that you're also a 30-year veteran and actually founder of the Rental Specialists in Sydney and also the current

Real Estate Institute of New South Wales board member. So welcome to the Property Hub's Realty Talk Show. Thank you. I'm so excited to be here today. Yeah, looking forward to this discussion. And I guess to set the scene, Jo, can you sort of start with a quick summary of the rent reforms that have been made today? So rental reforms were brought in in around March 2020.

there were some very broad reforms that came in that addressed things like minimum housing standards, allowing the tenants the freedom to make some very minor changes to the properties. We legislated break-lease fees in that particular tranche of legislative reforms. And there were a host of other things as well, such as changes to the rent increase regime, where it went from whenever we wanted to once every 12 months

um there were reforms around water usage and efficiency measures and how and when we can claim back water usage charges from our tenants um and there was also a host of uh dv domestic violence legislation uh that came in as well yep and in addition to that in 2022 in december we had strengthened rent bidding legislation that came in right so there's been quite a number of successive ways of this that are coming through what impacts are they having on landlords tenants property managers as as well as the flow and effects to rental supply and rent and the rental crisis that's everyone's talking about in 2020 when the when the first tranche of changes came in it was panic stations whilst we did have a long time to get our head around the new legislation

and we had a quite a long education process from fair trading with the industry we also had COVID hit that same time and so it was a very very very stressful period for particularly residential property managers um looking back march april 2020 it was hard hard hard yeah i could imagine a lot of landlords would have been up in arms and and probably because they weren't aware of the nitty-gritties of the legislation potentially overacting uh would made it very tough on you do you think all of this exercise and it's this ongoing progression has had has had an impact on rental supply and contributed to the rental crisis what's your thoughts joe In the investor world, investors are getting increasingly frustrated

with how their rights are being slowly eroded. Well, there is a mentality out there, and rightly so in my opinion, that it's my property, I should be able to transact with it as I will, as I want. Yes, tenants have rights, but you're taking everything away from me. And it really is, a lot of landlords are feeling very, very frustrated right now. Yes, I could well imagine. So are there any ongoing reforms that have been proposed?

And if so, what are your thoughts on them and what impacts are they likely to have as you see it? There are a number of reforms being discussed at the moment and being considered. The first one is around a portable bond scheme. There is conversation in the marketplace about how much money tenants have out there in the bond world and how difficult it can be for some tenants to save the money for a second bond whilst they're transitioning from one place to another. That is proving a little bit difficult to bed down in the mechanics. But nevertheless, that is a priority for the New South Wales government. the other reforms that are being discussed at the moment is uh the government wants to allow pets in rental properties as a as a given and i believe the model will be based on the victorian model

where a pet is allowed the owner has a certain period of time to object to that particular pet if they're silent on that then it's an automatic approval of the pet so we're moving in that direction chris minns the premier has said that that's happening um we as an industry are yet to see the detail on that um the other thing uh the other there's two other the major things that one is uh they want to change no grounds evictions now as an industry we are unsure whether they want to remove no grounds evictions on both a fixed term tenancy which is called an end of fixed term eviction um as well as the periodic um so we're we're we're a little bit concerned about how that's going to uh play out um i think that in my personal opinion i can live with a

no grounds um eviction on a periodic but if they take away the no grounds on a fixed term i think that that will be disastrous for landlords and I'm not terribly happy with that if that happens. And it has a lot of property managers and a lot of landlords concerned that particular piece of legislation that they're looking at tampering with. Can you expand on why you think landlords and yourselves are feeling that way?

It's probably pretty self-evident but I'd love you to spell it out if you can. if we don't have the ability to uh terminate a tenancy at the end of the fixed term then we end up with a situation where we could potentially have life tendencies and um we don't want that it's our investment property i am an investor myself so i understand it completely um we want to be able to deal with our property in a commercial manner as and when we see fit um it's it's nothing more and nothing less than that we want the ability to deal with our property that's it um where a tenancy falls over into a periodic tenancy there are already

reasons that we need to give to a tenant uh for that termination to proceed so there's not going to be too much change around that except for the removal of the 90-day no grounds notice. Ideally for us, for property managers, for landlords, we'd like to see that maintained as well. However, if we have to choose between one or the other, I would opt to let that go but retain the end of fixed term tenancy ability.

So it has a lot of people nervous right now. Yeah, I can imagine. I could see that one having a real impact right across the industry because people just pull their properties out of the market and investors would be present to get into it because of the handcuffs that it puts on them in terms of the flexibility to do what they want when they need with their property as far as that goes. The pet issue, again, I'd love your thoughts on that

because I know back in the days when my good wife owned and ran a property management business, she used to encourage landlords to accept tenants that had pets because they were cutting themselves out of a big portion of the potential rental market. However, there were some pretty clear parameters around that in terms of the type of animal, the behaviour of the animal, making good to any damage that was done to the property. So that was all sorted out front.

I'm not sure how it looks in the context of the legislation that's being proposed in New South Wales, but can you put a bit more colour around that one and your thoughts on that as well, please, Jo? I'm interested to see the detail around what the government is thinking on that. We haven't received as an industry any detail on that yet, so I'm looking forward to seeing it.

Common sense has to prevail here. The property needs to suit the animal. The animal needs to suit the property. The problem lies in that if we give an approval or if the owner gives an approval for an animal and it's a strictly outdoor animal, how do we how do we other than special conditions in the lease how do we prevent that animal from entering the property from causing damage um i i do agree that um by allowing pets we're opening the tenant pool uh so much wider and we are also uh tenants with pets tend to be more sticky they

tend to really lay down roots. They like to stay in the property because they know how hard it is to find a property that doesn't allow pets. So they tend to be great tenants overall. But yeah, we need to make sure that there's common sense in that legislation. Owners are going to need to ensure that they have very, very good insurance policies in place. And property managers also are going to ensure they need to ensure that they are really precise and particular with their entry condition reports none of this you know no comments no photos thing it will force property managers to be much more precise much more detailed with their entry condition reports which that isn't a bad thing yeah well that exactly it draws a very well-defined line in

sand in terms of the condition of the property before and post the pen and as you say yeah let's just hope that the legislation incorporates a common sense discretionary element that's matching the the the property to the pet and the pet to the property because you know having a great dame in a one-bedroom multi-story apartment wouldn't make a lot of sense and the legislation allows that can't blanch and then you've got to inject to it uh with with a potential that they'll get knocked back then that that doesn't make any sense for anyone really that's exactly right that's exactly right and also of course then we're leaving it in the hands of the members at the tribunal who well i don't need to say too much about that no we might reserve that

conversation for another time but yeah i guess to bring it all to a head and really get your thoughts on the future from your property management perspective what needs to change to actually improve rental conditions moving forward giving the the crisis that everyone keeps talking about? I think what needs to happen is landlords need to feel like they are being supported. The rental market is such at the moment where landlords need tenants and tenants need landlords and it's probably, you know, they need each other and so there needs to be respect on both sides. We can't have this punch up between both sides, you know, which is what's been happening at the moment. Landlords feel like they have just been beaten to death. I have to

be frank about that. They've been they feel like they're beaten to death. And they I do speak to some of my clients and they think to themselves, why am I even bothering? So let's stop punishing owners let's stop punishing investors and support them because without investors there wouldn't be enough public housing to house everybody who needs accommodation we're already experiencing a housing and affordability crisis so you know if more landlords leave the market then that's going to be disastrous but if the powers that be continue to fiddle around with the legislation and make investing prohibitive in New South Wales then that's exactly what's going to happen and we're going to be in all sorts of trouble well pretty good food for thought in the context of

the conditions that we're now in and and if there's ongoing tranches of these rental reforms that are ever tightening and restricting the ability of landlords on top of land tax impositions and and restrictions on airbnb durations and everything else that's been layered on the on the front foot rental freezers that keep getting popped up by the greens at the odd time which just, I won't even comment on that either because it just beggars imagination. Pretty scary concept, Jo, but again, I want to thank you for coming on to the show today to share your very informative,

insightful exploration of all these issues. And we encourage anyone in Sydney who'd like to investigate this further to reach out to you at therentalspecialist.com.au by clicking the link in the show notes. And thank you again for sharing all this with us here on the show today, Jo. Thank you for having me. Successful property investment is a game of finance.

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Now, as we continue our extended feature focus on property management, if you're adopting our suggested borderless national approach to your property portfolio so that you can diversify and identify the relative property strengths, weaknesses, opportunities and threats around the country so that you can optimise your property performance, this week we take a deep dive look at what's happening and what's about to happen with a raft of rental reforms in the festival and wine state of good old South Australia, where progressive waves of changes are being implemented to the rights and obligations of tenants, landlords, agents and property managers. So to find out what this means to you, we're joined by industry veteran and

award-winning senior property manager, Mariah Brearley from LJ Hooker Kensington Unling in Adelaide's leafy eastern suburb. So welcome to Realty Talk, Mariah. There I go, I just called you Mariah. It always happens. Yeah, we shouldn't have talked about that off air because Mariah it definitely is, and made the Freudian slip. So moving beyond that, just to sort of set the scene, Mariah, can you start by giving us a summary of the recent rental reform changes and stages in SA? Yeah, certainly. So last year started the first wave of changes, which saw things come in like the changes to bonds with them decreasing for tenants to make bonds and payment of bonds a little bit more achievable and affordable for them.

So we saw the four-week bond extend up to the $800 a week and then a six-week bond over that. So previously we were sitting at $250 for four weeks and then anything over at six weeks. Along with that, they brought in the band of rental bidding. So that's to stop agents or landlords trying to increase that price behind the application process and behind what's advertised online.

They were the two main changes that came from that wave. thankfully things like rental bidding wasn't a huge shock to the to i guess the professional industry it was something considered a little bit immoral beforehand so those changes have helped um but even just the pricing of rentals are removing that ability to have a range online and having one price so that it's very clear for everyone going forward what property should be advertised at okay that's good and there was another raft of changes came in on the first of March this year. Talk us through those. They did. So not as many changes, I guess, on that side from the 1st of March. I guess the most notable was the change to the frequency of

rental increase could be done. So limiting that to once a year. So once every 12 months, allowing that. And also the change around subletting. So previously, this could come at a charge to tenants and could be denied. So just changing that so that tenants aren't charged for those that right to sublet and not allowing landlords to decline that request without a reasonable explanation for that. Yeah, okay. I know that there's a whole bunch of new and tougher penalties imposed and the penalties sort of jumped up 10 to 20 times.

And I think that's quite good for the industry, you know, to mandate that and show that it is required that everyone follow that same line of legislation. Yeah, okay. Now, given your long-term role in the industry then, what impacts are you seeing these changes having on landlords, potential property investors and property managers like yourself? Yeah, I guess the most recent changes haven't changed too much

in the way we operate. I guess the bonds have raised a little bit of concern around landlords, the insurance, should there be a bond claim. So the requirement on an agent or a landlord to make sure that those routine inspections are conducted regularly and correctly to make sure that there's a limitation to any damages to a property, but also tougher on, I guess, following up rents and those sorts of things

because there's a little bit less of a safety net there, but also making sure things are in place for landlords like their insurance policies and compliance to make sure that they are protected should something happen and those bonds be on the lighter side, unfortunately. Yeah, no, that's good. I know the Adelaide market's been going gangbusters in the last couple of years and everyone from everywhere is piling into the equation. But have you seen potential property investors, those that aren't in there yet but are thinking about it, has it scared the horse as much in terms of those changes to come in as you read it?

I don't think the current changes have. I think the upcoming changes that have been proposed and are going through Parliament at the moment are certainly starting to scare off potential investors or those that are in the market that are caught between selling and maybe going back into the rental market are starting to weigh that up a little bit more seriously now. Well, that's a great entree into exactly that subject, Mariah. So talk us through what those upcoming rental changes are and when you think they may be implemented. Yeah, so we don't have a date for those changes yet. Hopefully, I would suspect they're going to come in at the beginning of the financial year.

I guess it just depends how quick they push them through Parliament. I guess the most notable of those changes will be allowing tenants to have pets in properties without landlords being able to decline that without a reasonable reason again, but also things like we're extending the notice that a tenant must be given should they wish to vacate. I think they are doubling that now to around the 60-day mark and also in terms of renewing rent or lease agreements that they are going to make sure that they are renewed

unless there's a prescribed reason for cancelling those lease renewals as well. So following very much along the likes of what Victorian government has brought in in the last couple of years. Yeah, I think Queensland has sort of been rippling out in that neck of the woods as well in terms of similar exercises as far as that goes. And I guess, again, I'd love your thoughts on this,

But allowing pets, I know that when my good wife was running a property management business, she was actually encouraging landlords to accept pets because you were knocking out a big chunk of the tenant population if you said no to that. And certainly there's ways of managing that to make sure it's not going to damage the property. What are your thoughts on that? I think that's right. But I think in the last maybe four to five years, especially around that COVID time, we saw a shift in landlords' open-mindedness to have pets at the properties, knowing that obviously people were spending a lot more time at home and they wanted that companionship. And as long as it's managed correctly, again, we don't see too many problems with those pets coming through. And that's been joined along by landlord insurance policy starting to cover damage from pets. So you're seeing that across the board, people are starting to understand that pets are a matter of or a fact of life and how we operate.

So I think it's just a matter of putting that in the legislation to make it even for everybody. Yeah, well said. Now, I know that a subject that I'm pretty sure is probably being talked about in SA, but it certainly has been implemented in Queensland, is the need to meet minimum housing standards. It's, is that something that's on the table on SI and what does that mean and what impact do you think that'll have? I believe it's on the table. It's not something that they've confirmed where we'll go ahead. I think it's definitely a great thing for the industry because there are probably quite

a few sub-Rs around with people that aren't in a position to maintain them or perhaps don't know what they need to do. So I think it is a really good thing for the industry, but I think it will see a lot of investors potentially exit the market if they can't afford to bring those properties up to standard within the timeframe set, which is what I think we're seeing in a lot of the eastern states as well at the moment. Yeah, there's been quite an exit out of a lot of properties because people just can't afford to spend the money to bring them up to speed. I guess in association with that, I'd be interested in your thoughts on a growing interest in other states is also the

energy efficiency and water saving standards that are being implemented and an energy rating that it's going to start attaching almost to the value of properties as well is that something that's been thrown around in good old Adelaide? It's something that's being spoken about more on an industry level than I believe the government level at the moment but I think it's sort of once this next wave of legislation is implemented it wouldn't be far away from the next wave I think for them to bring on if they're sort of looking at doing it in six- to 12-month increments. But I think, obviously, that's something they're going to have

to allow landlords a fair bit of time to get up to stand and get under wraps because it's something that, especially in the eastern suburbs, they are a lot of older homes, so it can take some time to get that work done. Yeah, no, good point. I know, again, in the eastern states, granny flats are a dime a dozen and that's all been incorporated in residential tenancy agreements. Is that something that's not such a big issue in South Australia, but is that something that's part of the discussion?

It is. I believe that's coming in in the next wave that we're seeing is that they will make the tendency of that be something that's optional, which we haven't had before, which I guess brings on a whole new set of challenges in the way of how we set those up for their energy and their water and those sorts of things as well. but it's something that I don't see as all too common in Adelaide at the moment. Yeah, no, good call. So I guess bringing that all together and we've touched on a bit of this already but what influence do you think

these future potential reforms are likely to have on future investor appetites for SA when we compare it with what might be happening elsewhere? Yeah, I think it will certainly make landlords and investors a little bit more hesitant in Adelaide especially where we're seeing, say, places like the city where there's a lot of buildings still happening, those rents aren't increasing as much as what we would have liked

or what we would have predicted. But in saying that, the entrance point to the market in Adelaide for an investor is a lot more affordable than it is in other states, so it does present a good trade-off in that situation. Yeah, no, very good point. So given all of that then, Mariah, how can property investors and landlords best ensure that they're actually going to be complying with the changes while still optimising their investment performance? Yeah, I guess from a landlord perspective or an

agency perspective, for us it's adopting and being very proactive to those changes. So making sure that you're keeping up to date with what is coming out from the government, whether that be through CBS or REITs or your property manager, and making sure that as these changes come to light, there's an action plan for those going ahead. And even if you're in the position prior to the tax year ending, being able to do some of those works, ready to claim on tax and getting a depreciation set to make sure you're optimising everything that you can is probably the best way to go at the moment. Yeah, very well said. Well, it's certainly, I love times of change because it always creates opportunity for those who are smart enough to recognise it. And what you've

reinforce today is that I would hate to be a DIY private landlord trying to manage a property myself because they're just not going to know what they don't know and they're probably getting themselves into all sorts of hot water without even realising it at this point in time. So I just want to thank you for keeping us abreast of the ongoing changes to the rental laws and their impacts in South Australia, Mariah, and we'll get you back again to talk more about continued rental reforms as they take shape. So thanks again for joining us on the Realty Talk show today. Thank you very much for having me. Are you curious about harnessing your super for property investment? Propel your future with the enlightening online seminar, The Ultimate

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Also, an invitation for you to join the conversation anytime. We'd love you to comment on Facebook. Simply search for The Property Hub Collective. A special thanks to our supporters and content partners, Realty.com.au, BMT Tax Depreciation, Know How Property Finance, Get Rare Property and Apiro Marketing. I'm Kevin Turner and on behalf of Bushy and the Property Hub team, we look forward to seeing you again next week. Thank you.