UPDATE 28 June, 2023: The State Government has banned rent bidding, announced on 27 June, in a bid to put a halt to soaring rental prices. The bans will come into effect on 1 September. But what is rent bidding and how will it help housing affordability?
Going. Going. Gone! An app full of favourited properties, queues of people winding down the streets of open houses, and more intensity than an AFL showdown – this is the modern tale of house hunting.
Right now, Adelaide holds one of the lowest property vacancy rates in Australia at 0.6 per cent, and our median rent is at a record high of $450 per week, creating a highly competitive market.
The shortage of properties and high demand for them has led to rent bidding, a practice being banned by the state government under reforms to the Residential Tenancies Act 1995.
So, what is rent bidding?
Rent bidding, which is also referred to as rental auction, is a negotiation on the price of a rental. In practice, it is the encouragement of potential tenants to make an offer above the advertised price in order to secure a property.
In a troublesome market, where record-high rental prices are forcing many South Aussies to seek emergency housing, rent bidding has become all too common.
Under the ban, landlords and agents will be prohibited from soliciting higher offers above the listed price.
The reforms also prevent landlords or agents from listing properties with a rent range, which is a tactic often used to encourage the act of bidding.
Adam Blight, Director of Property Management at Ouwens Casserly Real Estate, says you’ll often see a range rather than a set price to bridge a gap between what a property might be worth in the market and what the landlord wants, but it is becoming less common.
“Rent bidding doesn’t happen in our agency or the agencies I’m friendly with…when this was discussed with a small committee to assess the upcoming changes nobody had any issue with banning rent bidding,” Adam says.
SA will join other states that have restrictions on rental bidding including Victoria, New South Wales, Queensland, Tasmania and the ACT.
What does rent bidding look like?
Imagine this.
You’ve gone to the inspections, put in your forms, and won the application. But before you sign the contract, the landlord or agent tells you that the rent has gone up.
Did you just become a victim of rent bidding?
Rent bidding isn’t just an agent playing you off against other parties. If you have been solicited to pay above the advertised price, you have fallen into a trap – one that will now be illegal under the reforms. It is important to also note that this does not apply to standard yearly rent increases.
The above scenario is one Chelsea McLaughlin found herself in.
When The Post asked Chelsea if she had experienced rent bidding, she didn’t think she had. However, she had fallen victim to the tactic when she was informed upon the approval of her application that the rent would be an extra $20 per week.
“I was beyond desperate, so I just said yes,” she says.
Chelsea welcomed the new reforms, saying they were on the right track.
“The (rental) process has become more difficult,” she says. “Last year, it felt nearly impossible for me to find a place, and it was beyond stressful.”
Who does the ban apply to?
In short, the ban on rent bidding applies to everyone.
Whether you self-manage your property or hire an agent or property manager, rent bidding is a big no-no.
If a third party is facilitating tenancy applications, they must not assess prospective tenants based on whether they can offer higher rent.
Natalie Abbott, Principal of Property Management Adelaide, says this will certainly change how applications are assessed, and it’s a step in the right direction for market stability.
“It should be based on affordability, not who can pay more because they are not necessarily the best tenant for the property,” Natalie says.
As a tenant, if I want to offer more than the advertised price can I and can it be accepted?
Yes. Despite the bans, renters are still able to offer more than the advertised price and while this is still considered a form of rent bidding, it is not unlawful under new reforms. However, this is only acceptable if the offer is not requested by the landlord or agent.
The proposed changes have used evidence from other states such as Victoria, which indicates that the rent bidding ban will have enough of an impact on the rental market without needing to outlaw unsolicited offers by tenants.
Natalie explains that pre-pandemic, tenants would offer to pay more if they loved the property. Now, many wrongfully consider it something that needs to be done to win the contract. With the new ban, it puts the onus on the landlord to carefully consider the right tenant.
“[The reforms] will encourage landlords to favour good tenants,” Natalie says.
“While it might be enticing for a landlord to accept higher rent now, if that tenant isn’t the best tenant in the long run, it can end up costing them far, far more.
“They need to be focused on if the tenant can afford the property, if the tenant will look after the property and the stability of the tenants.”
So, before trying to impress your agent or landlord with a flashy number, make sure your application demonstrates your consistent employment or rental history or provides a cover letter explaining why you’re a great candidate who will take care of the property.
To find out more on rental laws, visit the Government of South Australia’s Consumer and Business Services website.
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