There are concerns Australian renters are being lured into paying more for overvalued properties through the practice of “rent bidding”.
According to Tenants Union chief executive Leo Patterson Ross, rent bidding is similar to “creating an auction” where tenants offer more than the advertised price or to pay 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,” he explained.
“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.”
Real estate agents are even calling potential tenants applying for a property and asking them if they want to offer more.
That’s something Loran Mamo experienced after spending months 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,” Ms 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.”
The 27-year-old has had to move back in with her parents due to not being able 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,” Ms Mamo said.
Median weekly advertised rents have skyrocketed by a historic amount, rising 10.3 per cent in the past year, according to the PropTrack Market Insight report.
The latest data means Australia is now experiencing the “tightest rental market we’ve ever seen” according to PropTrack director of economic research and report author Cameron Kusher.
Australia’s median weekly rent now sits at $520 for houses and $460 for units – jumping to $640 for a home in Sydney after a price rise of 12.3 per cent in the past year.
For those without the support of family or friends, or those facing a no-grounds eviction, the pressure can mount.
“People ask themselves, ‘Will I be sleeping in my car? Will I be couch surfing with my kids?,’” Mr Patterson Ross said.
“They start making compromises, either by offering more and competing or compromising on location or the quality of the home.”
Real estate agents can use other methods to try to prompt rent bidding; common tactics include advertising “offers from” rentals or putting a price range on an ad, according to City Futures senior research fellow Dr Chris Martin.
“By advertising a range, you’re basically misleading people,” he said.
“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.”
Dr Martin said agents calling and asking potential tenants for higher offers – a practice which seemed “normal” according to Ms Mamo – is 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.”
Ms Mamo said she was “scared” about whether she’ll be able to find affordable housing.
“I’m uncertain about whether I’m actually going to find an apartment, because it’s just so expensive,” she said.
“Even just going to the inspections; the amount of people that show up, it’s so daunting.”
Vacancy rate statistics recently released by Domain revealed finding a rental property in Australia has never been harder, with all capital cities classified as “landlord’s markets”.
The national vacancy rate now sits at 0.8 per cent, the tightest market ever on record, compared to a vacancy rate of 1.5 per cent last year.
Adelaide has the lowest rate at 0.2 per cent, while Sydney and Melbourne sit at 1.0 per cent and 1.1 per cent respectively.
Experts say more needs to be done to regulate rental advertisements, with Dr Martin arguing that state governments need to be “more forceful in enforcing those rules”.
“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.
“At the moment, the application process is nearly unregulated, with no guidance and no clear structure,” Mr Patterson Ross said.
However, both Dr Martin and Mr Patterson Ross argue the issue comes down to a tight rental market due to a lack of supply.
The current market can only truly be fixed by increasing the level of housing supply, according to Dr Martin and Mr Patterson Ross.
“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,” Mr Patterson 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,” Dr Martin said.
Originally published as Aussies facing conditions similar to auctions due to rent bidding