Newsletter - Inner Circle November 2017
Landlords could be detrimentally impacted by new ‘tenants rights’ laws
ONE of the most important pieces of property news over the past month has been the announcement of significant reform to Victoria’s Residential Tenancies Act by the Andrews Government, which is designed to give tenants more rights.
But what impact will this have on landlords? Quite simply, many of these reforms could have extremely detrimental consequences for investors.
In short, the government relies on investors to buy property for tenants to live in, given they can’t provide - and won’t fund - endless social housing opportunities. To introduce these reforms increases the risk for landlords and leaves them vulnerable, with significantly less control over their asset, which is worth hundreds of thousands of dollars.
The worst changes for landlords include:
- Removal of the notice to vacate for 'No Specified Reason'
- Limiting the use of 'end of fixed term' notices to vacate
- Bond capped at one months' rent for all tenancies of less than $760 per week
- Landlords unable to unreasonably refuse consent for pets
- Allowing tenants to make ‘minor’ property modifications
- Automatic bond repayment within 14 days when a claim hasn't been lodged
- Rent increases restricted to once per year
As buyers’ agents we’re experts in understanding price quoting, so if you’re looking to buy and you need help in this area, contact us for an obligation-free discussion.
Removal of the notice to vacate for 'No Specified Reason' and limiting the use of 'end of fixed term' notices to vacate means potentially not being able to get rid of a toxic, dangerous or destructive tenant, or even being able to gain access to the property for your own personal use until the tenant decides to leave. It will also mean you potentially can’t do renovations or substantial repairs until they leave of their own free will.
Bond capped at one months' rent for all tenancies of less than $760 per week, allowing tenants to make ‘minor’ property modifications, and early release of bonds by agreement before the end of a tenancy means bonds can be limited to less than any potential damage a tenant could cause based on their definition of a ‘minor’ repair. There is potentially no recourse if it takes more than two weeks to gather evidence (including repair quotes) to lodge a claim against the tenant as their bond will be automatically refunded.
Having rental increases restricted to once per year could cost landlords if the market changes rapidly and landlords can’t modify rents to reflect that (up or down).
We strongly encourage landlords to ensure their voice is heard on these reforms by providing feedback through the Government's Rent Fair Victoria website, well before the legislation is introduced next year.
Ballarat currently offers great potential for investors
The Melbourne market is still strong, recording the second highest quarterly growth and yearly growth of all the capital cities of 2% and 12% respectively to date, according to CoreLogic figures.
But at Property Mavens we’re also seeing good growth prospects in regional areas outside Melbourne, with Ballarat high on our list.
We’ve been sourcing properties in Ballarat for our clients since 2013, as we spotted its potential long ago. It has since grown significantly, but good buying opportunities are still available.
Two years ago Ballarat’s median house price was just under $300,000, according to CoreLogic figures, and now it’s approaching $400,000, sitting at $372,500 at the end of September. Average annual growth is around six per cent. Growth over the past 12 months in particular has been stronger than average, with buyers seeking affordable housing and investment options within close proximity of Melbourne.
Buyers are in fact flocking to Ballarat due to its strong affordability, as well as its growth proposition, with multiple growth drivers, including:
- Strong employment opportunities as some business relocate their head offices from the Melbourne CBD to this region, with developments such as the Ballarat Technology Park providing quality space.
- Established infrastructure and local amenities such as affordable private schools, universities and hospitals
- Transport, being around a 1 hour 15-minute train ride from Melbourne, and accessible via a dual lane freeway
- Growing population due to all of the above
For advice on how to balance your portfolio, contact us for an obligation-free discussion.
In any – and every - market it’s important to buy the right property in the right location and for the right price, and Ballarat is no exception.
But we’re noticing that in this region buyers coming from Melbourne are at least failing on the ‘right price’ component, overpaying by 10% to 15%. These buyers see Ballarat as being great value for money compared to where they live, but they’re comparing Ballarat to Melbourne prices (ie. apples with oranges), not Ballarat to Ballarat prices (apples with apples), which is resulting in them paying too much.
For example, this 3 bedroom, 2 bathroom house, situated within three kilometres of the Ballarat CBD was recently quoted as being priced between $335,000 - $349,000, but was sold to a Melbourne buyer for $385,000. Our analysis determined it’s not worth more than $360,000, so the buyer overpaid by $25,000. This is typical of a desperate home buyer who has missed out many times due to not understanding pricing in the first instance, getting frustrated and paying whatever it takes to buy the property. It was a strongly contested property with four offers within less than 24 hours of the property being listed for sale, but it was an over payment nevertheless.
Ballarat # 1
Due to our intricate knowledge of Ballarat gathered over the past four years, our skill in identifying the best opportunities in the region and our expertise in negotiating, we were recently able to secure solid yields on purchases for two of our clients, in accordance with their objectives.
We recently purchased this off market 3 bedroom house in a sought after Ballarat suburb for WA residents Emma and Jack, in less than four weeks from engaging our services. Delivering a 4.75% yield, it is a low-maintenance home with strong home buyer and tenant appeal due to its family friendly layout and location.
Ballarat # 2
We also purchased a 2 bedroom, townhouse in Lake Wendouree, a highly sought-after location in Ballarat, for $8,500 under the vendor’s reserve, delivering a healthy 4% yield. It is a very worthy addition to our clients, Kyrie and Mina’s, self-managed super fund.
These properties both have great potential for growth too, due to the multiple growth drivers in the region, as well as their location and desirability.
Ballarat # 3
This was another recent purchase and our clients 2nd SMSF purchase through us . We delivered another fantastic result securing a 4 bedroom, 2 bathroom house in another highly sought after location in Ballarat.
Delivering a 5% yield, it is a low-maintenance renovated home with strong home buyer and tenant appeal due to its proximity to schools, employment and its family friendly layout.
If you want results like this, click here to book a time with us discuss your requirements.
It’s 100% obligation free.