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NSW will outlaw rental bidding, bringing it in line with regulations already in place in Victoria and Western Australia, but the country’s largest real estate agency said rules already in place prevented property managers playing off renters against each other.
Premier Dominic Perrottet and Fair Trading Minister Victor Dominello on Monday said regulation changes to the Property and Stock Agents Act 2002 would outlaw the practice of inviting, suggesting or asking prospective tenants to increase their offer of rent for a property to secure it.
But even though the largest state was bringing its rules into line with Victoria and other states consulting on reforms, real estate agents in NSW could already face sanctions for the practice under their existing code of conduct, said Emily Sim, the head of property management at Ray White, which manages 194,000 properties nationally.
“Licensed real estate agents have a duty of care to everybody they represent,” Ms Sim told The Australian Financial Review.
“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 residential rental vacancy rate fell to a 16-year-low of just 1 per cent last month, data from consultancy SQM Research shows. The tight market is prompting real estate agents to expand their rent roll, or property management business, even as sales commissions slow.
“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,” Mr 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.”
Even though the market was tight, there was little evidence of prospective tenants bidding up prices, agency bosses said.
“We don’t see bidding,” said Geoff Lucas, chief executive of ASX-listed business The Agency.
“We see a lot of competition. We’ve seen groups of 30 to 40 people for individual properties in recent times.”
The Agency, which manages 5000 properties nationally, recently entered into an alliance agreement with property owner MDC Trilogy Group that Mr Lucas said would increase his properties under management by as much as 10,000 over the next 12 to 18 months, as it sought to tap the demand from returning overseas migration.
In a tight market, there needed to be transparency around rental pricing, agents said.
“It just doesn’t happen the way they think it happens,” said Kris Boghossian, Ray White Surry Hills director of property management.
“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 welcomed the government intervention but said the proposed regulations would do little to affect the problems renters faced.
“We are concerned with the detail as it seems it’s only going to do half the job – to only end 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,” said Leo Patterson Ross, Tenants’ Union of NSW chief executive. “The impact on the market will continue.”
Property investors said they did not support the practice of rental bidding.
“Property investment, as a long-term strategy, involves getting the best tenants you can for your property,” said Nicola McDougall, the chairman of Property Investment Professionals of Australia, an industry body for people working in property investment.
“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 lack of supply was the main problem.
“The reality is the market doesn’t lie,” REINSW chief executive Tim McKibbin said.
“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.”
Originally Published: Michael Bleby | Australian Financial Review | 13 December 2022