Cut-throat competition: desperate renters giving up pets and offering months of rent in advance

author-avatar By on April 07, 2021
Cut-throat competition: desperate renters giving up pets and offering months of rent in advance

Renters looking for a new home are facing stiff competition in one of the tightest rental markets in years.

Prospective tenants are offering well above the asking price, offering to pay several months of rent in advance, and in some cases even giving up their beloved pets to secure a rental property.

These are just a few examples of the lengths some renters are going to in order to get approved for a property as vacancy rates plummet in many capital cities and regional areas.

While Melbourne and Sydney remain the exception with high vacancy rates, almost every other capital city has a vacancy rate below 1%:

Rental Vacancy Rates Australia

Location

Feb-21

Jan-21

Feb-20

National

1.9%

1.9%

1.7%

Sydney

2.8%

2.9%

2.6%

Melbourne

4.7%

4.6%

1.6%

Brisbane

1.4%

1.6%

2.1%

Perth

0.7%

0.7%

1.8%

Adelaide

0.6%

0.6%

0.8%

Hobart

0.5%

0.4%

0.6%

ACT

0.8%

0.9%

1.0%

Darwin

0.8%

0.8%

3.2%

Source: Domain

The growing demand for rental accommodation is due to a combination of low housing supply and increased interstate migration - particularly the exodus from Sydney and Melbourne to regional areas.

“In Sydney and Melbourne, the general rule of thumb is that the closer you get to the city, the higher the vacancy rate,” Domain senior research analyst Dr Nicola Powell said.

According to SQM Research, the Sydney CBD vacancy rate dropped to 6.3% in February down from a whopping high of 14.8% in May 2020. Melbourne’s vacancy rate rose to 4.5%.


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.


But it’s a very different story in regional parts of the country, which SQM Managing Director Louis Christopher says will remain a “landlord's market”.

In Darwin where the vacancy rate is just 0.7%, house rents increased by 25% and 7.1% for units. Tenants in the Top End are now paying up to $150 a week more to rent a house than they were a year ago.

It’s a similar story in Perth, where house and unit rent prices surged by 12.8% and 10.2% respectively over the past 12 months. Tenants there are now paying up to $65 and $40 a week more for houses and units than this time last year.

When including regional Australia, national rents rose 11.1% for houses and 7.4% for units in the last 12 months.

Stressed out tenants struggling to find a new home

With rent prices soaring and vacancy rates plummeting, desperate renters are offering to pay above the asking price to improve their chances of being approved for a home.

One of those renters is Brisbane resident Sam Gaffer, who is at his wits' end as he battles it out with hundreds of other prospective tenants to secure a rental property. samgaffer

With a rock solid renting history spanning thirteen years, Sam is an ideal tenant. He has a healthy bank account and a booming business, so he didn’t think finding a new rental would be too hard.

After living in his last place for eight years, Sam was forced to find a new rental after his landlord sold the property.

“I started looking in February, thinking that would be enough time to find another place. I thought it would only be a few weeks until we found one,” he told Savings.com.au.

“We apply for five places a day, upload everything they need in 1Form, offer above market value for rent and all we get back is a text declining our application.”

Sam has also tried introducing himself to property agents to stand out among a sea of prospective tenants.

“You get no feedback - just get a text and email declining you. There is no indication of how you can improve your chances to secure a property,” he said.

“I call the property managers and they ignore you. I have visited property managers and they will not come out to talk to me. 

“Last week, after visiting one, I pulled over and cried. I can’t believe how hard it is to get a house.”

Sam is now considering renting an Airbnb or a hotel room so he doesn’t wind up homeless.

“I am living with friends at the moment, but that is not a long term solution,” he said.

“I am not sure what more I can do. It is causing so much stress that I have been to my doctor. I have gone from living in an executive home in Kenmore as a good tenant, keeping it immaculate, working hard all my life, have excellent references, and none of that is good enough.”

How to secure a rental in a tight market

With competition so fierce at the moment, even tenants like Sam who are doing all the right things are still struggling to get a look in.

Prospective renters are offering above market value, offering to pay months of rent in advance and in some cases, even giving up their pets if it means getting approved for a property - and they still can’t get anywhere.

So how can anyone get ahead in this market?

PRD Chief Economist Dr Diaswati Mardiamso, whose own three-bedroom apartment in Brisbane’s Indooroopilly was rented within three days of being on the market, said it’s absolutely crucial to gain an edge in such a competitive market.

“One of the things that property managers look at is your readiness as a renter, and this can be shown by having all of the relevant documents in order at the house inspection you are attending - ready to be handed over to the property manager on the spot,” she told Savings.com.au.

“You stand out if at the end of the house inspection you ask smart questions about the property and when you decide you like it you can handover a folder with all of the relevant paperwork that the property manager would need.”

Director of Rental Results Lauren Robinson said prospective renters should include a cover letter about themselves for the landlord “explaining information about who the applicants are, providing as much information about the applicant as possible so the owners get an understanding of them as people”, she told Savings.com.au.

If a renter has pets, providing a pet resume with references from previous neighbors and landlords could go a long way.

“As a pet owner myself, I think a lot of landlords should definitely consider tenants who have pets, especially if the property lends itself to catering for a pet, such as a fully fenced yard and no carpets,” Ms Robinson said.

“If the rent is over $700/week, the landlord can ask for an additional bond, but the majority of landlord insurance policies now do cover pet damage, so I would recommend looking into that.

“We’ve got a lot of great tenants who have pets that we would highly recommend, so any references or information that tenants can put forward to be able to appease the property owner’s concerns would be beneficial.”

But in such a tight rental market where competition is cutthroat, resorting to measures like offering above the asking price or paying months of rent in advance may not even make a difference. In fact, it’s often a case of first in, best dressed.

“It is a sign of how tight the rental market is right now,” said the agent who sold Sam’s former rental property, Adam Nobel from Hugo Alexander Property Group.

“In February we had 12 properties advertised for rent and we received 857 applications for these properties,” Mr Nobel told Savings.com.au.

“Sam’s story is not an isolated one. There are many cashed up tenants and property buyers who cannot get into the market because of the growing demand.”


Photo by Cuong Vu on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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