There are fears that Australian tenants may be incentivized to pay more for overpriced properties by the practice of ‘rent auctions’.
Tenants Union chief executive Leo Patterson Ross says auctioning rent is similar to “creating an auction” where tenants bid more than the advertised price or pay a large portion of the rent up front. to secure property.
“Right now, when things are getting very tight, many people are looking for property and there are only a limited number of them, which means the incentive people feel to apply successfully is increasing” , he explained.
“It puts real distress and frustration in the process because people have put all of these documents together.
“Then to be told that actually you have to come up with even more money to even get a shot, people are very worried and feeling the pressure.”
Estate agents even call potential tenants applying for a property and ask if they want to offer more.
It’s something Loran Mamo experienced after spending months looking for an affordable rental property.
“Every time I applied, the estate agents called to ask if I wanted to offer a little more,” Ms Mamo said.
“I thought it was a normal thing; I thought they were just doing it to make me pay more, but if it’s true that the competition is so high, then maybe people are giving in and offering more.
The 27-year-old had to return to live with her parents because she could not find affordable rental accommodation.
“If I didn’t have a place to stay, I would probably pay what they charge and spend all my salary on rent,” Ms Mamo said.
According to the PropTrack Market Insight report, median weekly advertised rents have skyrocketed by a historic amount, increasing 10.3% over the past year.
The latest data means Australia is currently experiencing the “tightest rental market we have ever seen”, according to PropTrack director of economic research and report author Cameron Kusher.
The median weekly rent in Australia now stands at $520 for houses and $460 for units, rising to $640 for a home in Sydney after prices rose 12.3% over the past year.
For those without the support of family or friends, or those facing eviction without cause, the pressure can mount.
“People are like, ‘Am I going to sleep in my car? Will I be couch surfing with my kids? said Mr. Patterson Ross.
“They are starting to compromise, either by offering more and competing, or by compromising on location or the quality of the house.”
Real estate agents may use other methods to attempt to induce auctions to rent; According to Dr. Chris Martin, senior researcher at City Futures, common tactics include posting “offers for” rentals or indicating a price range on an ad.
“By announcing a range, you’re essentially misleading people,” he said.
“You get all these people interested in a property at $400 a week, but what the agent really wants is $440 a week.
“By attracting more interested people, it makes people think there is a strong demand for a property and you can even get people to bid above the advertised price.”
Dr Martin said agents calling and asking potential tenants for higher offers – a practice that seemed “normal” according to Ms Mamo – are legally murky.
“The law isn’t very clear about that, which isn’t great for tenants,” he said.
“Agents who do this stuff should be aware that there are general fair trade laws and that in most states agents are required not to mislead in their advertisements.”
Ms Mamo said she was “afraid” of whether she would be able to find affordable accommodation.
“I don’t know if I’ll actually find an apartment because it’s so expensive,” she said.
“Even going to inspections; the number of people showing up, it’s so intimidating.
Vacancy statistics recently released by Domain revealed that finding a rental property in Australia has never been so difficult, with all capital cities classified as ‘landlords’ markets’.
The national vacancy rate is now at 0.8%, the tightest market on record, compared to a vacancy rate of 1.5% last year.
Adelaide has the lowest rate at 0.2%, while Sydney and Melbourne sit at 1.0% and 1.1% respectively.
Experts say more needs to be done to regulate rental listings, with Dr Martin saying state governments need to be ‘more forceful in enforcing these rules’.
“There is also the question of whether we should have broader regulation of rent levels which would affect how much rent will be and how much they might change,” he said.
“At the moment, the application process is largely unregulated, with no clear direction or structure,” Patterson Ross said.
However, Dr Martin and Mr Patterson Ross say the problem comes down to a tight rental market due to a lack of supply.
The current market can only be truly repaired by increasing the level of housing supply, according to Dr Martin and Mr Patterson Ross.
“At the end of the day, the real solution is to make sure there’s a plentiful supply of affordable housing so people don’t feel that pressure or that desperation,” said Patterson Ross.
“What we should be doing is developing our affordable housing providers, who can provide our affordable rentals in a way that our private sector can’t and won’t,” Dr Martin said.