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Assessing the real impact of SA’s new tenancy laws

By Emma Slape
10 July 2024 | 13 minute read
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Change is never easy to adjust to, but the property industry in South Australia has been working double time over the past few weeks to manage new tenancy laws and implement new processes.

Across the state, there has been some great collaboration as agencies have shared ideas, challenged the norms and worked out the most practical way to deal with some changes which, well, aren’t always that practical!

In a broader sense, there is understanding why some changes have been made – people’s homes should be safe as shelter is such an important human need – and industry firms understand that. As property managers, there is nothing more frustrating than a poor landlord who refuses to conduct reasonable maintenance and doesn’t respect that they are providing housing.

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However, it is still unclear whether the laws have tipped too far and are starting to whittle away rights that owners regard as essential to want to remain in the property investment market.

As a large agency, already we are starting to hear the genuine surprise when you explain to a landlord wanting (or needing) to sell, that in some cases we’re going to have to sell with a tenant in the property. Just this week, a generous landlord who’s held the property for over 20 years spoke to us about the need to sell her unit to fund cancer treatment. On the other side, we have an awesome tenant who has cared for the property like his own – and due to his wonderful tenancy, the owner has kept the rent very low (around 30 per cent lower than market).

Now selling this property with this tenant in place poses a risk – the new owner may not be able to raise the rent to market conditions as the increase may not be considered “proportional” – but the owner can’t afford to renovate and needs to sell it as is – so they are now potentially being penalised for being exactly the type of landlord we want to encourage!

It has to be asked, does this encourage new investors to a tight market? Or does it make an owner think twice about selling next time their tenant vacates?

The positive part of this story is that the tenant will probably vacate as he cannot do enough for the owner who has extended him this generosity and does not want her to end up achieving less in the sale (and we will do all we can to find him a cute place that reflects what he needs). However, what if the tenant didn’t take that approach?

While the easy answer from those outside the industry is to say, “only the wealthy have property, they can afford it”, however, as those working in property know, this is generally not the case and lots of owners make their own sacrifices to build wealth through investment.

Pressure on the private rental market has never been greater. As we all know, there is a rental crisis Australia-wide, and Adelaide is experiencing one of the greater shortages. However, it also has to be remembered how much Housing Trust stock has been sold over the past 20 years. This has gradually forced more tenants into the private market – when many years ago, they would have sat squarely in government-supported accommodation. This creates a different set of challenges, and by default, many owners now have marginal tenancies in multiple respects.

As a review on the effectiveness of these new laws takes place, the behaviour of investors must be part of this. And of course, the situation is not isolated to South Australia either – the pattern of tenancy changes is firm state to state, and there are already some troubling trends around sale which need further validation and monitoring to ensure that we have adequate housing stock for the future.

Emma Slape is the chief executive officer of Turner Real Estate.

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