On the 1st of October 2022, all the anticipated rental reforms for QLD will commence. Below is everything you need to know to prepare and more!
QLD rental reforms commencing 1st of October 2022.
Ending a Lease
Current legislation: An owner/property manager is able to end a fixed term lease or a periodic lease (commonly known as ‘month to month’) without grounds, providing tenants with 2 months notice.
New legislation: An owner/property manager is able to end a fixed term lease without grounds, providing tenants with 2 months notice.
An owner/property manager is able to end a periodic lease only under the below 3 grounds:
This new legislation allows no room for error when it comes to the lease renewal process. When a fixed term agreement is not renewed, it immediately rolls onto a periodic lease. After the 1st of October this year, if this occurs it becomes extremely difficult to remove tenants if they are not the best fit for your property. Essentially, on a periodic lease, owners/property managers will lose a lot of control over their investment. Having a property manager that is on top of their lease renewal processes has never been more paramount.
Renting with pets
Current legislation: An owner/property manager has total discretion whether to allow pets to be kept at the premises.
New legislation: A tenant can seek the property owner’s permission to keep a pet, and a property owner can only refuse a request on identified reasonable grounds, such as keeping the pet would breach laws or by-laws. A response needs to be provided to the tenant within 14 days, otherwise consent is deemed given. The new legislation covers the owner such that providing approval to keep a pet may include reasonable conditions, like requiring the pet to be kept outside. However, a pet bond is not a reasonable condition. Also, it is outlined that damage caused by a pet is not fair wear and tear on a property and that the tenant is responsible for any and all pet damage.
The wording of this legislation leaves room for interpretation – “on reasonable grounds”.
The only definite reason to refuse a pet included in the wording of the legislation is through the use of Body Corporate by-laws. When looking at houses, the line is fairly blurry on saying ‘no’ to pets. We will be monitoring case studies, once the legislation is in action, to try and get a clearer understanding of where the line is drawn.
Minimum housing standards
Current legislation: A tenant has 3days from their lease start date to return the Entry Condition Report.
A owner/property manager must prepare to fix items included in the property. Example, if a dishwasher was included at the commencement of the lease and it breaks down during the tenancy, the owner must repair/replace the dishwasher to a working standard again. A tenant can request maintenance items to be fixed, however an owner/property is not required to fix it if the liveability of the property isn’t affected.
New legislation (Stage 1): A renter has 7 days from their lease start date to return the Entry Condition Report. Tenants can seek QCAT orders, enforced by the RTA, including that the property can’t be rented or allowing reduced rent until repairs and maintenance are completed.
New legislation (Stage 2): Commencing 1st of September 2023.
Rental properties must comply with Minimum Housing Standards when a new lease is entered into from 1 September 2023.
New legislation (Stage 3): Commencing 1st of September 2024.
All rental properties must comply with Minimum Housing Standards from 1 September 2024.
It seems due to the severity of this reform and to allow time for owners to prepare financially, it is being introduced in 3 stages. The premise is to ensure all properties are safe, secure & functional for renters. As investors, if you don’t already, it may be ideal to ensure your budget for outgoing maintenance expenses is sufficient to comply with the incoming rental legislation.
All of these legislative changes could create less supply of, and higher demand for, rental properties, possibly increasing rental prices even more.
Take a look below at how the rental market in Brisbane has performed over the past 12 months!
Brisbane saw property values reduce significantly, and almost immediately, after the last major flood event in 2011. CoreLogic’s analyst Eliza Owen found that property prices across Brisbane fell by 6.1% in the 12 months after the floods. And some suburbs fell a whopping 18%; prices with the steepest declines were reported in Chelmer, Rocklea, Graceville, Yeerongpilly, Fairfield, Fig Tree Pocket, Indooroopilly, and Kenmore. Not only were property prices affected almost immediately after the event, but research also shows the worst affected suburbs took three to nine years to recover.
However, Owen explains that it is extremely difficult to isolate the direct impact of property prices to the 2011 floods. “This decline was triggered by a tightening in monetary policy amid a resources boom, and Australia’s recovery from the GFC (Global Financial Crisis).” Before the GFC, interest rates were already at an all-time high, we saw strong inflation and as a result, house prices were dropping. Throw in a natural disaster after the economy slowly began to recover, morals dropped again as Brisbane citizens rolled up their sleeves for another financial fight.
Though, today’s economic situation might just be the polar opposite. Australia has been experiencing a housing boom and before the 2022 floods, the Brisbane housing market had an increase of 8.5% in the quarter to December 31st 2021; the strongest state growth nationwide. Compared to 2011, we are currently experiencing ultra-low interest rates and relative economic stability. Real estate research analyst Terry Ryder said “The disaster may have a psychological impact on people who were poised to buy in the city.” He believes the market will recover more quickly than it did following the 2011 floods. With the housing growth leading up to the event alone, some could say it’s fair to assume Brisbane won’t see any material long term impacts on the housing market.
The Brisbane rental market had already grown significantly amid the pandemic. Now, with many tenants and owners alike having to vacate flood damaged properties and those properties waiting for repairs, we are seeing subdued rental stock and heightened demand and this could put further upwards pressure on rental prices. We had a look at Ray White Alderley’s rental activity directly before and after the 2022 Brisbane floods. See our stats below!
As savvy investors, we usually look at two key elements when choosing an investment property – rental yields and capital growth. These are both hugely important factors, but aside from that, could longer term tenants and fewer letting fees contribute to a better return on your investment? We investigated whether rental price affects tenancy tenure and thus the frequency of letting fees. Take a look at our findings below.
In the past, buying land and building a house has been the best economic choice, in most cases. However, with increasing building costs and land prices, is this still the case? Let’s examine the pros and cons of buying built vs building an investment house:
Building An Investment Property
Land value can vary significantly by location. In Brisbane’s inner city rim, land prices average around $600,000 – $700,000 for 405m2. The current construction cost to build a 4 bedroom, 2 bathroom, 2 car base line home starts from $450,000. Assuming there are no demolition costs or council fees, the total cost to build a house is about $1,150,000.
Buying A Newly Built Investment Property
When looking at recent sales of newly built houses it’s important to take into consideration the differences in initial land value and building style that can largely affect its overall value.70 Fanny Street, Annerley, a 4 bedroom, 2 bathroom, 2 car house on 453m2, sold for $1.4M in January 2022. Another newly built house at72 Khartoum Street, Gordon Park sold in October 2021 for $1.67M on a 405m2 block.
Depending on your current situation and investment strategy, there are multiple pros and cons to buying built or building an investment property. There is plenty of tenant demand for newly built houses and either way there will be at least less maintenance to worry about!
Take a look at the graphic below.
Dogs, cats, birds, fish? Approval of pets. It’s the law getting the most attention and creating much distress amongst property investors.
“A renter can seek the property owner’s permission to keep a pet, and property owners can only refuse a request on identified reasonable grounds, such as keeping the pet would breach laws or by-laws.” The property does also need to be suitable for the pet, i.e. with fences, reasonable size yard. So, for owners of a unit or townhouse, pet approval power still remains with the body corporate committee. However, for most others it means a blanket ‘no pets’ policy is no longer an option. Note, it is still unknown when this change will come into effect.
Likewise changes to ending a tenancy ‘fairly’ have been passed but not yet implemented. Property owners can no longer end a tenancy, simply ‘without grounds’. New grounds to end a tenancy are as follows:
A serious breach (eg. rent arrears or damage) remains a valid reason for eviction. What this means is, it will become more difficult to replace a tenancy on a periodic lease as the grounds of ‘end of a fixed term tenancy agreement’ don’t apply. For a periodic agreement, it won’t be possible to end such a tenancy easily unless the owner wants to renovate, sell or move into the property.
Also, domestic violence victims can break their lease with 1 weeks notice and replace locks without owner approval. This emergency COVID legislation has been made permanent and is already in effect. As well as a reform to ensure properties of sound condition, set to commence in September 2023.
These changes do give tenants more security but it removes some power from property owners in terms of control over their valuable investments. Moving forward – now more than ever – with all the forthcoming legislation changes, a well-informed and experienced property manager is imperative. Your property manager needs to wholly understand the new legislation in order to look after your best interests and protect your largest asset.
Take a look at the statistics below…
Sale prices for houses in Brisbane are booming but do we see the same trend for apartments? Dive into the details below!
In Queensland, our residential preferences have always shown houses to be more popular than apartments and this has only been reinforced in recent times. The price gap between houses and apartments in Brisbane has drastically increased since the onset of Covid-19 to a record high of 58%. In particular, inner city apartments are in severe oversupply, classified as a high risk investment for both equity and cash flow. However, is this all about to take a turn?
We see two major factors contributing to the possibility of a price gap reduction between houses and apartments.
We all know that houses in Brisbane are achieving higher and higher prices every day with little evidence of slowing down. House prices have been consistently rising with an average monthly growth of 2% since the start of the year. Whereas, apartment prices have been at more of a standstill with an average increase of 0.8%. However, apartment prices have risen 1.4% for the month of August. Is this just the beginning of a strongly anticipated price gap beginning to narrow?
Top tips for investing in an apartment:
Everyone has surely heard by now – Brisbane is officially the host of the 2032 Olympics! Let’s take a look at whether holding the Olympic Games actually influences host cities’ property prices.
When speaking to investors recently, they are advising, “I’m purchasing this property because the Brisbane Games is approaching” or “Instead of selling my investment property in this heightened market, I’ll hold onto it for another 11-12 years.” But what effects have we seen in the past to support these hopeful forecasters?
Barcelona hosted the Olympic Games in 1992 and saw an increase of 130% in property prices over the 5 years leading up to the event. The city underwent major renovations with the addition of the Alta Velocidad Española, a high speed train line connecting to Madrid. As well as a revitalization of the city’s waterfront district, this no doubt contributed to the price spike.
Sydney hosted the 2000 Olympic Games and saw the property market increase by 88% over a 5 year period. $6.6B was spent on improving infrastructure and transportation. However, the reason for this housing market boom was the great economic prosperity that Australia experienced around this time. During this 5 year period, influences such as tax reform (GST), large property buyer grants, a global technology boom and unprecedented economic development occurred independent of the Games.
London hosted the Olympic Games in 2012 and saw housing prices increase 38% over 5 years. The impact of this boom is significantly lessened by the enormous $16 billion expense of preparing to host.
Brisbane will host the 2032 Olympic Games.
It’s yet to be determined how Brisbane will be impacted by the Olympic Games. “The traditional seven years from announcement to event date has been extended to 11 years, thereby further diluting the investment.” says Simon Pressley, Head of Research at Propertyology.
South-East Queensland already has plenty of existing infrastructure since hosting the 2018 Gold Coast Commonwealth Games. As such, the cost of preparations has reportedly been advised to be lower other cities’ spending, estimated at $4.5billion.
Property owners should not bank on the Olympics to stimulate high growth in the residential market. In reality, refurbishment projects and upgrades to transport and other services and facilities could have a beneficial impact on property prices, not necessarily from the Olympics. Instead, Pressley advises “to focus on the Olympics for what they are: a fantastic display of talent, sportsmanship and national pride”.
This month we dive into how the newly proposed Housing Legislation can affect your power as an investor. Will tenants gain more rights than landlords?
Buying your first investment property today could soon have a different impact for the future than expected. The Queensland Government has recently introduced their Housing Legislation Amendment Bill 2021, awaiting parliament approval. How will this edition of the Bill impact investors? Take a look below:
Predictions suggest that a higher amount of property investors may sell in order to put their money into a more investor controlled environment. This would mean less rental properties available, the same high demand and as a result rent prices will increase.
See further insights and information on the bill here: Rental Law Reform – Housing Legislation Amendment Bill 2021.
Now more than ever, it’s important to have the best advice on investment opportunities and a knowledgeable property manager to guide you through these proposed changes!
Happy New Financial Year! So far, 2021 has been an exciting year for real estate and we have seen unprecedented growth in the Brisbane property market.
Is it safe to say these numbers are expected to be the norm now? Who will be in Brisbane’s Million Dollar Club next year?