Real estate giants say regulation doesn't address the real problem
New South Wales plans to outlaw rental bidding, bringing the state’s laws in line with regulations already in place in Victoria and Western Australia. However, Australia’s largest real estate agency says there are already rules that prevent property managers from pitting renters against each other to drive up prices.
NSW Premier Dominic Perrottet and Fair Trading Minister Victor Dominello said Monday that changes to the Property and Stock Agents Act of 2002 would prohibit the practice of inviting, suggesting or asking prospective renters to increase their offer in order to secure a property, The Australian Financial Review reported.
While the change brings the rules into line with other states, real estate agents in NSW already risk sanctions for rental bidding under their existing code of conduct, according to Emily Sim, head of property management for Ray White.
“Licensed real estate agents have a duty of care to everybody they represent,” Sim told AFR. “If a tenant today in NSW wanted to complain about rental bidding, they could go to NSW Fair Trading and say, ‘I applied for this property at $500 per week, the advertised rent, and it went to a friend of mine for $520 per week.’ They have grounds to complain, and Fair Trading would take that up as an unethical practice.”
Australia’s national vacancy rate hit a 16-year low of 1% last month, according to data from SQM Research. The tight market is spurring real estate agents to expand their property management business, AFR reported.
“It can be very distressing for prospective tenants who have submitted a rental application only to be told to increase their offer to improve their prospects of securing a property,” Dominello said. “From this weekend, agents will be prohibited from inducing a prospective tenant to offer an amount higher than that advertised for the property. Further, real estate agents cannot advertise a property unless it specifies the rent payable for the property.”
Agency heads insist that although the market is tight, there’s not much evidence of prospective tenants bidding up prices.
“We don’t see bidding,” Geoff Lucas, CEO of The Agency, told AFR. “We see a lot of competition. We’ve seen groups of 30 to 40 people for individual properties in recent times.”
“It just doesn’t happen the way they think it happens,” said Kris Boghossian, director of property management for Ray White Surry Hills. “If someone does offer over the asking price, out of courtesy you go back to every other applicant and say out of courtesy there has been an offer over the asking price. You’re not trying to solicit bids from people.”
Tenant advocates, meanwhile, welcomed the change. However, they said the proposed regulations wouldn’t do much to ease renters’ other woes.
“We are concerned with the detail as it seems it's only going to do half the job – to only end the solicitation of bids from real estate agents – but it doesn’t sound like it’s going to address offers made over the advertised price, which is the biggest problem,” Tenants Union of NSW chief executive Leo Patterson Ross told AFR. “The impact on the market will continue.”
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Property investors told the publication that they didn’t support rental bidding.
“Property investment, as a long-term strategy, involves getting the best tenants you can for your property,” said Nicola McDougall, chair of Property Investment Professionals of Australia. “It’s not just who can pay the highest price, but who has a strong and stable rental history, who’s going to look after the property like their home over the long term.”
The Real Estate Institute of NSW said the government wasn’t addressing the real problem – a critical shortage of supply.
“The reality is the market doesn’t lie,” REINSW chief executive Tim McKibbin told AFR. “The ongoing attacks on people who work in the industry and who own an investment property are a shameful attempt by government to distract tenants from its own shortcomings – namely its failure to support the supply of homes for people to rent.”
