There are concerns that the practice of “rent bidding” is forcing Australians to spend more than they should in fear of being left homeless as supply dries up.
Leo Patterson Ross, Tenants Union chief executive, said that rent bidding is similar to “creating an auction” where tenants offer to pay more than the advertised price or fork out a large portion of the rent in advance to secure a property.
“At the moment as things get very tight, many people are looking for a property and there is only a limited number available, which means the incentive that people feel to make a successful application grows,” Patterson Ross told news.com.au. “It puts this real distress and frustration into the process because people have gotten all these documents together. Then to be told that, actually, you have to come up with even more money to even be in with a shot, people are very worried and feeling the pressure.”
Potential clients applying for a property are sometimes even called by real estate agents and asked if they want to offer more.
That’s what 27-year-old Loran Mamo experienced after months of looking for an affordable rental property.
“Every single time I’ve applied, the real estate agents have called to ask if I’ve wanted to offer a bit more,” Mamo said. “I thought it was a normal thing; I thought that they were just doing it to get me to pay more, but if it’s true that the competition is so high, then maybe people are buckling and offering more.”
She was forced to move back in with her parents after she failed to find an affordable rental property.
“If I didn’t have a place to stay, I’d probably pay what they ask and I’d be spending my whole wage on rent,” Mamo told the news.com.au.
According to the PropTrack Market Insight report, median weekly advertised rents have soared by a historic 10.3% in the past year.
The latest data means Australia is now experiencing the “tightest rental market we’ve ever seen,” said Cameron Kusher, PropTrack director of economic research and report author.
Australia’s median weekly rent now sits at $520 for houses and $460 for units – rising to $640 for a Sydney home after a 12.3% price lift in the past year.
Those without the support of family or friends, or those facing a no-grounds eviction, might feel further pressure.
“People ask themselves, ‘Will I be sleeping in my car? Will I be couch surfing with my kids?’” Patterson Ross said. “They start making compromises, either by offering more and competing or compromising on location or the quality of the home.”
Chris Martin, City Futures senior research fellow, said real estate agents are employing other methods to try to prompt rent bidding, such as advertising “offers from” rentals or putting a price range on an ad.
“By advertising a range, you’re basically misleading people,” Martin told news.com.au. “You get all these people interested in a $400 a week property, but really what the agent wants is $440 a week. By getting more people interested, it makes people think there is high demand for a property, and you can even get people bidding above the advertised price.”
Martin said agents reaching out to potential tenants to ask for higher offers – a practice which Mamo said seemed “normal” – was legally murky.
“The law is not very clear around it, which is not great for tenants,” he said. “Agents that are doing that sort of thing should be aware that there are general fair trading laws and in most states, there are requirements for agents to not mislead in their advertisements.”
Mamo said she was “scared” and “uncertain” about whether she’ll be able to find affordable housing.
“Even just going to the inspections; the amount of people that show up, it’s so daunting,” she said.
Domain recently released vacancy rate statistics which revealed that all capital cities have been classified as “landlord’s markets.”
The national vacancy rate now sits at a record 0.8%, compared to last year’s 1.5%. Adelaide has the lowest rate at 0.2%, while Sydney and Melbourne sit at 1.0% and 1.1%, respectively.
Martin said state governments need to be “more forceful” in enforcing rental advertisements.
“There’s also the question of whether we should have a wider range of regulation of rent levels that would affect how much the rent would be and how much they’d be able to change,” he said.
Patterson Ross noted that “at the moment, the application process is nearly unregulated, with no guidance and no clear structure.”
Both Martin and Patterson Ross argued, however, that the issue comes down to a tight rental market due to a lack of supply, and that the current market can only be fixed by increasing the level of housing supply.
“Ultimately, the real fix is to make sure that there is an abundant supply of affordable housing, so people don’t feel this pressure or desperation,” Ross said.
“What we should be doing is growing our affordable housing providers, who can provide our affordable tenancies in a way that our private sector can’t and won’t,” Martin told news.com.au.
