Sell or spend? Victorian landlords grapple with new laws requiring minimum standards
Landlords in financial strife across Melbourne are rushing to sell their investments as new rental laws that require minimum standards for properties come into effect.
The laws, introduced on March 29, mean some landlords would rather sell up than fork out to meet what is required.
Landlords knocked about by COVID-19 are now looking to sell, rather than spend to bring properties up to standard, raising fears of fewer available rentals and higher rents. In March, Melbourne’s vacancy rate sat at 4.6 per cent, down from 4.7 per cent in February, Domain data shows.
Stockdale & Leggo Victoria CEO Charlotte Pascoe said there had already been a rush of landlords from the outer-eastern suburbs looking to sell up over the past few days.
“Our Langwarrin office has received 20 requests from landlords wanting to sell,” Ms Pascoe said. “It’s just diabolical, it’s huge.”
Some landlords had struggled throughout COVID-19 without being able to collect rent or insurance for loss of rental and were now faced with spending extra to fix up their properties.
“Many of them are in really tough situations, and people think because they are landlords they have a fancy car and lots of cash when they could be 100 per cent reliant on their rents to pay the mortgage,” Ms Pascoe said. “They’re living hand to mouth.
“All of this is going to make it harder for tenants because there will be fewer properties and rents will go up because of it.”
While many of the new minimum standards for rentals were formalising what was already in place, there had been a lack of clarity around the new legislation making landlords nervous about the future, Ms Pascoe said.
Under the new standards introduced by the Victorian Government properties must:
- Include lockable windows and external doors;
- Provide a working kitchen and toilet;
- Include window coverings in bedrooms and living spaces to provide privacy;
- Provide a fixed heater in any property. By 2023, this heater must have a two-star energy efficiency rating;
- Contain a shower head that has a water saving rating of at least three stars;
- Have checks of gas or electric appliances like stoves and heaters every two years;
- Ensure there are proper switchboards with circuit breakers in rentals.
Ray White Victoria and Tasmania CEO Stephen Dullens agreed there had been cases of rental property owners approaching agents to sell their investments.
“There are cases we’ve heard of and it really depends on the person’s circumstances,” Mr Dullens said.
Some were older landlords who would have needed to spend thousands of dollars fixing up their property and felt it would be easier to sell.
Others, he said, would be looking at Melbourne’s post-COVID-19 booming property market and making a decision to offload their investment for possibly a huge profit.
“No doubt it’s on people’s minds,” Mr Dullens said. “What we saw at this time last year was a lot of investors having come out of the market. What we’re seeing now is that they’re coming back.”
Mr Dullens said there were a lot of conversations around the new laws, and some potential landlords wanted to snap up newer properties that would more easily comply with the minimum standards.
Barry Plant Victoria CEO Mike McCarthy said he had heard some landlords were looking to sell due to the new laws, however, it was not a huge rush so far for his agents.
“There’s not a flood but there definitely will be some where they are not compliant,” Mr McCarthy said. “I really think this will take at least a year for it to fully play out.”
Landlords were nervous about what the new laws meant for them, he said.
“There is a lot of angst because of the increase in processes and procedures like the gas and electricity checks so there’s a lot of questions,” Mr McCarthy said. “For landlords managing a property themselves this is going to be very difficult. There will be a fair period of adjusting.”
While property managers are grappling with the changes to the laws, the Renters and Housing Union are thrilled with the introduction of minimum standards.
“Outsourcing housing provision to the private market was a mistake – housing is a human right but we turned it into an investment opportunity,” organiser Jesse Frances said.
“If landlords are genuinely selling up in Victoria, the government could take this opportunity to fix the 10-year public housing wait list and put an end to homelessness [by acquiring these properties for public housing].”
Ref: MELISSA HEAGNEY | SENIOR JOURNALIST (on 06 Apr 2021). Sell or spend? Victorian landlords grapple with new laws requiring minimum standards. Retrieved from https://www.domain.com.au/news/the-rush-is-on-to-sell-rentals-that-dont-comply-with-new-victorian-laws-1041785/#:~:text=Victorian%20landlords%20grapple%20with%20new%20laws%20requiring%20minimum%20standards,-Melissa%20HeagneySenior&text=Landlords%20knocked%20about%20by%20COVID,available%20rentals%20and%20higher%20rents.
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