Apologies for subjecting you to another short-term letting vent, but after last week’s state government schemozzle when the new holiday rental regulations were announced, then shelved, we thought we’d better have a look at what was going on.
And it turns out it was a case of history repeating itself.
Remember a couple of years ago when the then Planning Minister Anthony Roberts and former Better Regulation Minister Matt Kean were about to announce new NSW short-term letting regulations that would basically have handed the whole box and dice to Airbnb-style hosts on a plate?
The microphones were plugged in, the TV cameras lights were at full dazzle, and then right at the last minute a couple of Government MPs realised that residential rentals across the state were about to be handed wholesale to a bunch of American “disruptors” with few if any comeback or restraints.
Suddenly it was mikes off, lights out and “don’t call us, we’ll call you”.
Well, something similar happened last week, only the announcement of what would probably have been the toughest short-term letting regulations in Australia was made and then three days later they were shelved until November
What happened? Surely it wasn’t just that holiday rental giants Stayz and apartment owner advocates OCN both complained bitterly, was it? Listen to the podcast for our somewhat cynical insight into the whole farrago.
Also we look at Mascot Towers, two years down the track, the massive financial losses apartment owners face and what we think the government should do.
And Sue visits West Australia where property is going through the roof in a state that almost defines the phrase “boom and bust”.
That’s all in this week’s Flat Chat Wrap.
Transcript in full
Wow, what a week; double whammy! No sooner had we published last week’s podcast, all about the new Airbnb or short-term letting regulations, then the government did a U -turn.
Yeah, they were obviously listening to you, Jimmy and thought, ‘wow, we realize there’s so many problems with it.’
Then I’ve looked on the internet and discovered that you couldn’t actually hear the podcast anyway. We had about 11 listeners and then you were away; you were in Perth?
Yes, I was.
So, I couldn’t re-record.
But you managed to sort it out.
Kind of, yes and here we are today. We’re going to talk about why we think the government changed its mind. We’re going to talk about Mascot Towers; the latest on that. And, we’re going to talk about a massive projected increase in house prices in WA.
A sign of my dedication, going over there to check it out for you.
Absolutely, going round all the real estate agent windows, taking notes. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.
And I’m Sue Williams and I write about property for Domain.
And this is the Flat Chat Wrap.
So, that was a pretty sudden turnaround by the government on short-term letting. I mean, they released it on Friday afternoon, a week ago. ‘Take the trash out day’ (they call it on the West Wing here, where you get rid of all the stories that you don’t want to have too much coverage in the weekend papers, in the hope that they’ll all be forgotten about, come Monday). The Owners Corporation Network got really upset about some of the provisions. The Stayz people (I think they’re owned by Expedia), got very, very, very upset and Airbnb stayed very, very, very quiet.
Who knows what they think?
I think we know what they think. Then suddenly, the planning minister came out and said in the interest of conciliation and fairness and giving everyone a chance to adjust to the plans, they were putting them off until November.
And do you think that’s a good idea? I mean, given the fact that we’ve been waiting so long for this.
Well, there is nothing in them that was a shock. I mean, they toned down the fire safety things a little bit. I think the thing that upset Stayz was the extension of the 189-a-year limit to regional areas.
They hadn’t seen that coming; no-one had seen that coming.
Nobody had seen that coming, but apparently, they’d been talking about Byron Bay having a 90 night limit. That was always on the cards, because they’ve got terrible problems there, where the people who live in Byron Bay can’t afford to live there anymore, because all the properties are given over to tourism. So, there was some talk about Byron Bay having a 90 night limit and then a lot of other councils apparently approached Planning and said, ‘hey, if they’re going to have a limit on theirs, have a look at what’s happening in our areas, because we’re suffering too.’ It was places like Newcastle, Dubbo, Bega, Muswellbrook; areas like that, where local people are under a lot of rental pressure, because of the properties being given over to short-term rentals. They said, ‘well, we want the same limit as you have in Sydney.’
But what do you think the government’s going to do now? I mean, they’ve delayed it, so probably, they’ll talk to all the interested parties. What do you think they’ll decide?
I think they’ll go ahead with it. I think they’ve actually come up with a good formula, and I don’t see anything wrong with protecting local communities. Regardless of what any of the big holiday letting platforms say. They’re all saying, ‘okay, tourism is a big part of the Australian economy and coming out of the pandemic, we want to get tourism back on its feet.’ But, these are not hotels and motels. You know, they’re not going to create many jobs, having people able to let their private homes to tourists.
It’s people investing, because interest rates are so low and then just turning them into Airbnb properties, just to cover their mortgages.
Yeah, and those properties come straight out of the residential rental market, and we’re seeing here in Sydney and especially in Melbourne, the effect that that’s had on rental properties, that these Airbnb or short-term let properties are coming back into the market. Rents are plummeting and availability has gone up. I mean, it’s really as simple as that. There are other elements, like people who lived in shared homes are going back to their own homes and things like that. But it’s not insignificant that there are no tourists going into short-term let properties. I think this whole thing about ‘oh, we’ve got to boost the tourism industry,’ would be true if tourists were coming from overseas (to some extent), but they’re not.
Well, it’s interesting, because I think a lot of Australians are quite cashed up at the moment, because we haven’t been spending our money on overseas travel. We are deciding to travel to the regions much more, but we actually have a bit of money to do it with. We’re choosing to stay in quite nice hotels, and we’re splurging a little bit more than we would normally. The government keeps telling us, ‘please, do splurge even more,’ so why not stay in a nice hotel or a nice motel? Some of the caravan parks are just quite incredible now. They’re real lifestyle resorts, with fantastic facilities for families. So, why not give your business over there?
That’s one of the things that was a little quirk in the proposal regulations, that you wouldn’t be allowed to list a property that could be moved.
A bit hard to keep track of that!
I think that they mean caravans, but, the one thing that we really needed (which could have been brought in without having to throw that particular baby out with the bathwater), was the register of properties.
And that’s coming in again in November.
Well, the one company; the one player in all this who hates registers with a passion, is Airbnb, because wherever registers have come in, their listings have plummeted. A lot of people who are listing on Airbnb, simply shouldn’t be doing it.
Or, aren’t declaring their earnings on their tax.
There’s a number of reasons; they’re not declaring their tax, they are subletting properties and they haven’t asked the owners of the properties for permission to do that. There may be controls over Airbnb or short-term lets that they don’t want people to know that they’re doing. It may even be that they don’t want people in their apartment block to know that they’re letting on Airbnb. When it came into Japan a couple of years ago, I think they lost something between 80 and 90% of their listings initially. Partly because the Japanese people didn’t think it was going to make any difference and then they discovered they had to go to the council to get a registry number for the property and then that had to be given to Airbnb to get the listing online. If they didn’t do it, because they couldn’t be bothered, or they didn’t take it seriously or whatever, suddenly found they couldn’t list their properties. Now, that kind of thing really annoys Airbnb specifically, because they’ve always worked on this basis of kind of ignoring the planning laws. You’ve got your rights as an owner to let your property; wherever, whatever it might be, go ahead and do it. It’s easier to apologize than it is to get permission.
And what were the objections from the OCN, the Owners Corporation Network?
Well, I think, to be honest, they kind of got the wrong end of the stick initially, which was that the government had included affordable housing. They changed the affordable housing to allow them to be included as short-term lets.
So, some people thought that’s encouraging people in affordable housing to let out their homes for Airbnb, but you don’t think that’s right, do you?
No, I think it was a case of they wanted to bring the affordable housing into the whole umbrella of short-term letting so they could stop them from being used and certainly, that’s what Planning told me.
Right, so if they’re in affordable housing, they would have to undergo the same kind of regulatory framework to be listed on Airbnb. People would see that they were letting out their homes to Airbnb, and probably, in lots of cases, they’re not allowed to.
Absolutely, and it was a case of saying, ‘okay, we’re going to bring you into what is permitted into the general area of short-term letting, but by the way, our regulations mean you cannot use short-term letting.’ Whereas, I think they were concerned that if they didn’t include them in that part of the law, then people would take advantage. They would go, ‘right, we’re not included; we’re excluded from this. Therefore, we don’t have to list our properties.’
Well, that’s understandable, isnt it? Maybe, it was just badly worded, if it’s caused so much confusion.
It’s shockingly explained. I mean, I don’t blame OCN at all. They didn’t have time to check with Planning. The thing just came out, and there it was. A couple of people (not in the OCN hierarchy, but a couple of members), got very agitated about it, and sparked off this whole thing. All it took was one email from me to Planning to say, ‘really? You’re going to allow short-term letting in affordable housing?’ They said ‘absolutely not,’ but then they could have explained it so much better.
So, yeah, what will survive?
Well, that will survive, in some form or another. I actually think that everything that is in the regulations make sense; they just haven’t explained it very well. That’s what the difference will be, come November. It will give them a chance to sit down and say, ‘we have done this for this reason.’ Your question about the OCN reaction; the OCN reaction is (as it always has been), that this is framed as home-sharing, and it’s not. The vast majority of Airbnb and other short-term lets in Australia, the owners are not in the property. They’re not sharing anything. All they’re doing in apartments is sharing our common property facilities with other people and not putting that money back into the wear and tear of the common property.
I think this legislation overrides bans on Airbnb that many buildings have enacted in their bylaws, or can the bylaws still stand?
The bylaws still stand.
Oh, good. Okay, I hadn’t realized that.
Yeah, the bylaws are still part of this whole framework.
So individual buildings can say, ‘no, we’re not going to have Airbnb in our building at all?’
Oh, that’s good, because that’s what most apartment owners were really nervous about.
City of Sydney did a survey about a year or so ago and they discovered that investors generally are in favour of being able to let their apartments on short-term rentals, if they wanted to. When you look at the buildings around the city that are mostly owned by investors, then the potential there for getting those bylaws in are pretty limited. We will see what OCN calls ‘quasi’ hotels.
Particularly post-COVID really, because so many of those apartments are un-let at the moment, because there is such a shortage of tenants, with no overseas migrants coming in, and no students. Maybe that will provide a good opportunity for some owners of property to recoup some of their losses.
What you will see is a kind of apartheid of ‘quasi’ hotel apartment blocks, and purely residential apartment blocks. So, the apartment blocks that are now mostly residential only, will stay that way and the other ones where there’s a majority of people who want short-term letting, the long-term residents will move out. The whole building’s will be taken over by short-term lets, which is not what the government wants, but as we’ve seen in the last week, the Planning Department is not particularly good at planning.
Or, explaining what they’re doing.
They should have a ‘Department of Explanation.’ When we come back, we’re going to talk about the poor people who invested in Mascot Towers and what faces them and what can be done. That’s after this.
While you were away, the people in Mascot Towers had a meeting about what they can do about their predicament, where the building is falling down. They are not allowed to live in it. They can’t sell their apartments, obviously.
The court case is still ongoing, isn’t it?
I think it is, but in the meantime, they’re sitting there paying mortgages on homes that they can’t live in, and they can’t afford to fix. They had a meeting last week in which they were told the bill to fix the building is now way above what the building is actually worth.
The suggestion has been that they take advantage of the New South Wales law that allows 75% of people to vote to sell the whole building; sell it to a developer. A developer will come in, knock it down, reinforce the foundations and build something completely new and they can all expect to take a financial hit of between 70 and 80% of the value of their home.
Oh my gosh!
So, if they paid $500,000 for their apartment, they can expect to get $100,000 back.
Oh, that’s terrible!
So they’re still going to have… What are they going to do about these mortgages? I don’t know.
Are many of them defaulting? You kind of think it must be so tempting.
To do what the developers do and just walk away?
That’s right, yeah. It’s a shame you can’t walk very far at moment with COVID. You can’t go overseas.
Yeah, I don’t know what happens if you default on your mortgage? You’d find it difficult to get another one.
That’s right, and I guess the bank would come after you, really.
But if you don’t have any assets…
Maybe you have to declare bankruptcy.
I think that might be.
Then the problem is you can’t get a credit card and things like that and these days, nobody uses cash anymore. If you don’t have a credit card, you’re a bit hamstrung.
The government has been incredibly slack on this. I mean, Fair Trading (the worst named department in the whole of government, apart from possibly, Planning). I know that behind the scenes, they’ve been offering advice, and you know, the rest of it, but as far as assistance goes, where are they? What are they saying? Why are they not out there, championing the cause of the owners? They’re supposed to be looking after customer service. Well, where’s the service? If you’re just sitting there going ‘oh, dear, that’s a shame. It’s a shame you bought into this building,’ which may have actually been perfectly well-constructed. Because of the really crap regulations in New South Wales, they don’t want to do anything that ever discourages developers from developing. You know, this isn’t a new building; this is the thing. People are going ‘oh, well, you know, you can always get your defects fixed in the first six years.’ Well, it’s not; it’s a 12-year-old building. It’s older now. Anyway, the developers are gone; they’ve disappeared.
The developer next door (who they’re taking action against), is a big, well-known developer, so they’ll be fighting it, one would think.
Tooth and nail.
And they produced lots of photos, saying that there were cracks in the building before they even started work on their building, but that court case is ongoing, so we can’t judge what’s going to happen. Didn’t your heart go out all those people in Mascot Towers? You think, what is the thing that they can do? What do you think the New South Wales Government should be actually doing?
Well, as I say in the article that I posted this week, at the very least, they should be offering interest-free loans to the owners, to cover all their legal costs.
Yep, that’s a really good idea.
And those loans should only be repaid if they win the case. So, if the Mascot Towers owners win the case against whoever, and money was awarded to them, that goes back to the government. If they don’t win the case, the government goes, ‘alright, sorry. It’s kind of our fault that this has happened, because for years, we’ve just handed consumer protection over to the developers and this is what happens.’
I think that’s very fair. In fact, I think it’s fair if they didn’t have to pay it back.
Well, the distress and disruption to their lives…
I mean, you’ve had people there; their marriages are breaking up. They’ve got kids. Oh, the stress they must be under!
Every one of those apartments is a story of somebody who’s been badly let down. Some people, as you say, its breaking up their families. People are having to move back in with their parents. So, it just has this ripple effect throughout their lives. What amazes me is okay, we’ve got a pandemic on and all that stuff, but right from the start, where has the government been? You know, government, who, for decades have been happy to take money from developers for their political parties, are just going ‘oh, yeah, well, not really our problem. You should never have bought an apartment in the first place,’ which is very much the attitude.
Yep, and it’s great that they’ve got the Building Commissioner there.
But that’s for the future.
They’ve got to look after the people who have suffered in the past.
Well, they don’t think they do.
And that could have been any of us. It could be any single one of us who bought an apartment.
The critical thing was self-certification, where developers were able to hire their own certifiers, and that skewed things all the wrong way. The other thing was when insurers went, ‘oh, hang on. Do we really want to be insuring these buildings that have been self -certified? No, thank you.’ Rather than the government saying, ‘okay, well, we will take over the insurance,’ they said, ‘okay, you don’t have to insure them if they’re over three storeys high, but what you can do is sue the developer.’ So, you get the situation where you’ve got owners who have never possibly lived in an apartment, never possibly been in a court of law in their lives, are suddenly being asked to take on big developers, big money and attack-dog lawyers. Because the government says, ‘well, you can, if you’ve got a problem.’ This is shocking. It’s disgusting. It’s absolutely disgusting.
We’ve got experience of that, having been to court with developers of our building as well. It’s a horrible situation, whichever way you look at it. I remember (I might have spoken about this before), being in a meeting, a mediation meeting with the developers, and our chairperson at the time, had a heart problem and was being monitored for his heart. It was all strapped up to a monitor and every time he got a bit stressed, it would ‘bleep.’ So, we were in this meeting, and they were making suggestions, and we were making suggestions, but unfortunately, every time we got a bit anxious, his monitor ‘bleeps,’ so they knew when we were on the defensive. It was the worst position to possibly be in when you’re negotiating with people.
And I recall you saying at the time, that you’d go for these meetings with the developer’s lawyers, and they would sit down and say, ‘okay, we’ll do X, Y, and Z,’ and you’d go ‘great, thanks,’and then you’d get a letter from them…
Completely at odds with what they’d said, yep.
And they did this again, and again and again and then when you went to court over it, they said ‘we made all these offers, and they rejected them,’ because they’re sleaze -bags and scum.
Yep, they are. On that happy note!
So, we should all move to WA, Sue. We should all be buying property in WA and you’re going to explain why, after this.
And we’re back. So, there’s a property boom in the offing in West Australia, which you have just visited last week.
Yes, there sure is. It’s quite incredible. You probably know that Perth has been in the doldrums for property for many, many years because WA depends on resources, but resources are going incredibly well at the moment. The market is amazingly buoyant, so Perth property is really increasing. Earlier this year, in January, it was the fastest growing property market in the whole of Australia, which is quite incredible. In the first three months of this year, it went up by 5% and because it was so strong, everybody’s had to revise their growth figures for the market and now, the Real Estate Institute of WA says prices are going to go up this year by 15%, which is massive. I guess the reasons are that resources are going well, competence is strong, so everybody’s buying. There’s not much supply, although when you go around Perth, there are cranes everywhere; new housing estates being built everywhere. But, it’s funny; in some of the suburbs, houses are being sold within six days of going onto the market. It’s incredibly affordable, compared to Sydney.
Were these not going through the roof to the point you couldn’t afford to sell in Sydney and buy in WA?
No, that’s right. You could sell in Sydney, and you could buy a couple of houses, for that price.
Wow! There’s a plan. WA does seem to be a real boom-and-bust place, doesn’t it?
It’s a very volatile market, because resources really go up and down on the international market, so that’s a force completely beyond your control. You can’t predict what’s going to happen in the future, so that’s why it’s really hard to invest in those resource-rich areas. You kind of look at some of the rates of growth and you think some parts of WA; some of the mining areas, the iron ore… You’ve got Port Hedland. I think prices went up last year by about 9% and you think, ‘wow, this will be a good place to buy residential properties and investment,’ not necessarily to live there. I would hate to live in Port Hedland. But, you think ‘I could make a really fantastic return.’ You have to remember, that in Port Hedland a couple of years ago, they had a big crash. The prices were wiped out by 80 to 90% overnight.
Wow! Was that when the Chinese stopped buying our iron ore, or something like that?
That’s right; when the market collapsed. So, you look at resource places and think, ‘well, I could make a lot of money,’ but you can actually lose a hell of a lot of money as well.
On a slightly different tack; what was it like traveling to WA?
Oh, it’s interesting. It’s funny to be on a plane for such a long time. Five hours on the way there, just four hours on the way back. I had to fill in a lot of forms to be allowed into WA and then when I arrived at the airport, they’ve set up a kind of immigration hub. You had to go through immigration to get in there and you had to present your pass. You know, you had to apply for a pass before you got there and had to be approved. Then, they asked you questions about where you’d been in the last 14 days and if you felt ill and if you’d had any contact with anybody with COVID or had any COVID tests, so it was quite an ordeal, getting in. But, then once you get there, Perth is a great city. I think a lot of people have never been to Perth because it’s such a long way away and it’s pretty expensive to get there. I think the airfares were about $1,000 return, which is a lot at the moment. I mean, you can go down later, when there are more flights. It’s a really thriving city. There’s lots of new precincts. There’s lots of new hotels, really great hotels. There’s an awful lot happening there. Lots of new cafes, restaurants and it’s as if COVID has never happened, almost. You can wander around the streets. Nobody is wearing a mask and it’s quite an exciting, go-getting place.
I saw a couple of people in the street in Sydney this morning, wearing masks. There are some people who are just not ready (yet), to risk… Whatever risks there are.
They might have underlying health conditions. I think it’s really affected a lot of people’s confidence and I think it has really hit some people very hard.
But WA is the place to be and now they’re even talking about seceding from Australia.
They always do, really, but they’re really kind of going ahead with lots of very ambitious projects. They’re planning a National museum there now, which will be a museum for the whole of Australia. They’ve just opened a huge new museum; a Museum of Western Australia, which is one of the best museums I’ve ever been in. It’s quite incredible. The interactivity, the light shows; the way they showcase all the attractions. It was astonishing. It was worth a trip over to see that, alone.
Do you think this is going to be their version of MONA?
Yep, quite. It was so exciting. It was full of children. It was school holidays, but these kids were just really enjoying pressing buttons, watching films, listening to audio. It was an astonishing sight. You could go and live there; you could go to a museum once a week. You could buy a house (the median house price is still only $495,000, which is just about half of our house in Sydney and substantially less than than Melbourne). You could probably have a very high quality of life.
Right, because you’ve got cafes and museums. What more do you need?
So, invest in WA, but get out quick as soon as things start to slip back. Thank you, for coming back from West Australia and giving us your words of wisdom.
You’re very welcome.
And thanks for listening. Bye.
Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website, www.flatchat.com.au And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, Stitcher, or your favorite pod catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.