What’s behind Victoria’s rental crisis?

What’s behind Victoria’s rental crisis?

Rental law changes implemented in 2021 have been blamed for a mass exodus of investors leaving the Melbourne market.

In a blog post on Philip Webb Real Estate’s website, Anthony Webb, the agency’s chief executive officer, claimed that the state’s current 4 percent vacancy rate, which had dropped 0.7 percent since May, has been heavily influenced by the amendments to Victoria’s Residential Tenancies Act implemented at the end of March 2021.

The new laws set out a range of provisions to protect renters, including changes to the maximum amount of bond that can be charged by landlords and stipulations over the requirement for a number of basic amenities in every rental propertyas well as rules that dictate renters cannot be evicted unless the Victorian Civil and Administrative Tribunal (VCAT) considers it reasonable.

At the time, Melissa Horne, Minister for Consumer Affairs, Gaming and Liquor Regulation, called it the “biggest reforms to renting in Victoria”, while the state government claimed landlords would benefit from having “stronger accountability from those renting their properties”.

However, Mr. Webb said this is not the case. He acknowledged that while it is positive and important to look after renters, the knock-on effects of the laws have been neglected, with these consequences finally coming to light.

In March last year, then-Real Estate Institute of Victoria (REIV) chief executive officer Gil King said that “increasing ownership costs and making maintenance and management of property more complex is a deterrent for investment”.

He also added that the introduction of new costs would likely result in “higher rents and could see mum-and-dad investors exit this asset class, putting further pressure on rental availability and affordability for Victorians”.

The latest sales data from Philip Webb Real Estate has alluded to Mr King’s predictions coming to fruition, with the agency reporting a large proportion of landlords exiting the market in the last 12 months due to their inability to meet the new regulatory demands. According to Mr. Webb, 100 more properties had been sold from the agency’s rent roll over the last financial year, representing a 60 percent increase in the volume of sales seen in previous years.

Mr Webb concluded there is no immediate solution to the problem currently facing the Victorian rental market. However, he does foresee investors flocking back into the market over the next two-to-four years, especially as rental prices and rental returns continue to climb, which in turn should attract an increased number of investors into the state to increase supply and match demand.

What’s behind Victoria’s rental crisis?

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Last Updated: 02 August 2022

Published: 02 August 2022

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