How a ban on rent increases will impact tenants in long run

While many tenants are certainly happy that the ban on rent increases in Western Australia has been extended until 28 March 2021 and their rent will not be increased, things arent as black and white as this and will ultimately create more problems for tenants.

How does this work?

At the momentthe vacancy rate is at a 12-year low of 1.3 per cent,withonly approximately 3,000rental properties in Perth currently available for tenants to lease.

To put this into perspective, just one year ago there were6,599properties available to rent and the vacancy rate was2.6per cent.

Lowvacancy rates are normally a trigger forinvestorstoenter the rental market which increases stock levels, however due to theResidentialTenancies (COVID-19 Response) Act, investorsappearreluctant to buy.

Why does this impact tenants?

Typically, when the vacancy rate lowers and competition builds for the current rental stock, rents start to increase. This is generally a gradual increase over a longerperiod of timeand at smaller increments such as $10 per week.

Ifthe current ban on increasing rents is lifted in March 2021,itwill be reasonable to assume that landlordswill have to significantlyincreaserentsto match the market.

This will mean thattenants do not have the opportunity to havetheir rent increased, in small, manageableincrements but willprobablyface a sharp pricecorrection.

How does this impact landlords?

While most landlords are willing to help those that are struggling due to the impacts of COVID-19,the vast majority ofWestAustraliansare now back to work and able to meet their rentalobligations.

Landlords have experienced no income growth in more than three yearas the median rent stayed at $350 for 12consecutivequarters.

Just as the market looked likeit was beginning to recover, the legislation has stoppedrents increasing, even minimally, despitethemajority oftenants not being financially impactedby COVID-19.

Therefore, more investors are being forced to sell their investment property which also adds pressure to rental stock as it usually moves the property out of the rental marketto an owner-occupier.

What can you do?

Have your voice heard by joining REIWAs campaign:A fair go for tenants.

REIWA understands that there are quite a few tenants and landlords out there who are struggling with the extension, which is why we are calling on everyone to tell us their story.

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