Podcast: Rent rise shocks, new kids on the blocks

There’s been a lot happening behind the scenes in Strataland over Easter.  For a start, there’s the latest figures on booming rent rises across Australia. 

Is it any surprise that the area with the lowest rent rises just happens to be the one with the only rent caps in the country? You awake, Chris Minns?

Speaking of whom, NSW has a new Fair Trading Minister, Anoulack Chanthivong, and with all respect to cultural differences, you have to wonder how long it will be before his name is distilled down to AnoVong by his minions.

New Customer Services and Digital minister Jihad Dib has no such issues.  We take a look at the qualities these high achievers bring to their jobs.

We wonder what Australian Resident  Accommodation Managers Association (ARAMA) CEO Trevor Rawnsley has been putting in his tea. It’s one thing to think people in houses are more deserving than people in apartments, but to come out and say the former should be protected from Airbnb while implying that the latter can cop what’s coming to them is another thing altogether.

And finally we look at the house that collapsed in Condell Park, Sydney, and wonder if this will send shivers through the whole free-standing home industry. Those shivers can be very destructive.

TRANSCRIPT IN FULL

Jimmy  00:00

Hello from sunny Glasgow. I’m overseas again, but Sue is running the controls  today, so hopefully everybody can hear what we’re saying. How are you going, Sue?

Sue Williams  00:10

Not bad at all. I’m keeping my fingers crossed that everything goes like clockwork here. You’re up in Edinburgh at the moment, aren’t you?

Jimmy  00:18

I’m in Glasgow; I will be in Edinburgh later today, to get a flight to Paris, which is not as glamorous as it sounds. Hopefully, I’ll get there and it’s still working and it hasn’t been closed down by strikes. It all seems to have gone quiet, but maybe we’re just not getting the reports. We’d better crack on; what are we going to talk about today?

Sue Williams  00:42

Today we’re going to be talking about unit rents, which have gone up by huge amounts… A new Domain report just came out last week. ARAMA are thinking that Airbnb should be banned from houses, which is kind of interesting. And we’re also gonna be talking about the new New South Wales Minister for Fair Trading; a really interesting guy. Did you hear over in Edinburgh about this house in Condell Park in Sydney falling down one night, when the family were asleep?

Jimmy  01:19

I saw the pictures. That was amazing!

Sue Williams  01:21

What an incredible story; it’s awful. I mean, you wouldn’t wish that on anyone, but maybe, people who live in houses are suddenly realising what it might be like to live in a shoddy apartment.

Jimmy  01:36

Well, we’d better crack on. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue Williams  01:42

And I’m Sue Williams and I write about property for Domain.

Jimmy  01:45

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

Okay, what’s first up on the agenda, Sue?

Sue Williams  02:03

A new report came out last week from Domain, about rents. I mean, oh, god, it makes terrible reading, really. But it’s interesting, because it’s separated out house and unit rent, and out of the 10 biggest rent increases across the nation, six out of those 10 were for apartments. Unit rents are at record highs across all the combined capitals (apart from Canberra and Darwin), but they’ve had stronger rent growth than houses, so they’ve had the fastest quarterly increase on record. Melbourne, Brisbane and the combined capitals have the fastest annual increase on record. Some of the rents have been absolutely incredible; the rent increases.

So, the top rent increase in the whole of the country, was for units in Bass Hill, (which is Canterbury/Bankstown, in Sydney’s southwest). For the last year, they went up 62.8%. Isn’t that incredble, in a year? And in second place, it was in Queensland; Brisbane West (Flinders View), which is kind of Ipswich. Units there, the annual change in the median weekly asking rent went up 56.2%. And then in Melbourne, in the inner urban city, units went up 46.7% in rent. Collingwood was up 40%, units in Port Hedland in Western Australia (which I once called the asshole of Australia), 38.5%. In Port Douglas, up in tropical North Queensland, they went up 37.1% All those poor people, who went up there during COVID and thought “well, we get a cheap rent and a much cheaper lifestyle…” I mean, it’s pretty tough for them now.

Jimmy  04:00

Talking of COVID; are we seeing here a post-COVID bounce? Rents that were being held down during COVID are suddenly being released, or are there other factors at play here?

Sue Williams  04:11

There are other factors. I think the bounce came much earlier on. And now the other factors are the shortage of housing, the huge demand, the number of people who no longer want to share places; they kind of want their own place. Households have gotten much smaller, as well. Also, the lack of investors, so there’s there’s fewer homes available for rent as well, because of interest rate rises. There’s an awful lot of factors at play here. I think the bounce-back came back a while ago; now its extreme market forces. There’s no no peace in sight at all for tenants; you feel so sorry for them.

Jimmy  04:52

The one thing that they shy away from every time this comes up (and this has been mentioned a lot recently), is any kind of rent control. You know, either linking it to CPI or linking it to mortgage rates. They are absolutely terrified of the idea of rent control, but I can’t see any other way that you could curb the growth in rents. It’s worth noting that in Canberra (which has one of the lowest rent rises across the country), they do have a cap on rents, which is based on the CPI, plus 10%.

Sue Williams  05:30

Well, Chris Minns has already discussed a rent cap and he’s ruled that out. He says “no, that’s not the way to go.” He says the way to go is supply. And of course, long term it is supply, but supply is going to take a long time to get here. You know, even if we had 20,000 development approvals put in on Monday, it’s going to take maybe three years for those homes to get here, if the bureaucracy doesn’t stop them first. Yes of course,  long-term supply is the answer, but in the short-term, its got to be something like a rent cap.

Jimmy  06:07

There’s got to be some sort of rent control; I think it’s absolutely valid. I reckon if anybody is, as an investor, claiming negative gearing on their investment, then they should be subject to rent controls. It all seems to be geared to give, give, give to the investors and it’s the tenants who cop the negative side.

Sue Williams  06:36

But then at the same time, we are  kind of having to pander to investors, because we’ve got to encourage investors to buy more properties, to let them out to tenants.

Jimmy  06:45

But if there are no properties for them to buy, that whole argument falls over.

Sue Williams  06:49

Yes, that’s right.

Jimmy  06:51

I mean, it’s something that you want to have as a temporary measure… You say “we’re going to put this in place for the next year, or 18 months, until supply improves and hey, if you don’t want to have rent control, just send us a letter saying that you don’t want to claim negative gearing in your tax return and that’s fine; you can charge as much rent for the place as you want.”

Sue Williams  07:14

That sounds like an interesting idea. And also, I think the Minns’ government (in New South Wales, anyway), although obviously, this is a national thing… They’re talking about looking at more help for tenants; giving them grants and things, and also, helping them to transition to home ownership. That’s very praiseworthy, but at the same time, if there’s not enough homes to go around, it doesn’t really help.

Jimmy  07:36

I mean, it’s a definition of madness, isn’t it; trying the same thing and expecting a different result? What they’re going to do if they’re putting more money into tenants’ pockets to pay their rents (which is fair enough), is inflating the market more. We’ve seen that with the housing benefit; you know, the grants to first-time homeowners. The developers who are selling the properties just add that money to the cost of the homes that they’re selling. It’s so short-sighted and it’s all because of some political thing; they just don’t want to be seen to be controlling people’s rents, or whatever. I think it’s pathetic. I think the politicians from State level right through to Federal, have shown themselves to be absolutely gutless when it comes to this issue. It’s a huge issue that’s affecting hundreds of thousands of people, and they don’t want to be seen to be too controlling. Well, why did you get elected, if you’re not prepared to make tough decisions? Yes. Absolutely. Talking about getting elected; I would love to have a chat about our new Fair Trading Minister for New South Wales.  Anoulack Chanthivong.

[MUSIC]

Jimmy

So do you reckon Anoulack Chanthivong  is destined to become the most misspelt government minister?

Sue Williams  09:15

And probably most mispronounced as well, quite possibly.

Jimmy  09:19

There’s a lot of letters in that name and as someone who spends their life telling people that there’s no ‘p’ in Thomson, I wonder how often he has to tell people how to spell his name correctly? But it’s interesting, his background… He’s come in as Fair Trading Minister, but previously, he was the Shadow Minister for Finance, Industry and Trade. And now he’s got Innovation, Science and Technology and Building and Corrections, which has got nothing to do with the spelling of his name… It’s all about prisons.

Sue Williams  10:07

Sure, absolutely. But he’s a qualified economist, as well. That puts him in a good position I think, to deal with industry and trade, and obviously, Better Regulation and Fair Trading as well. Let’s hope!

Jimmy  10:20

Well, I don’t know. I mean, as they say, you ask five economists a question and you’ll get six opinions. I’m not sure that Fair Trading actually needs somebody with purely an (and this is making an assumption that he is not capable of looking at things from a more socially aware perspective), economic perspective on apartments. It’s probably what we don’t need right now.

Sue Williams  10:49

I disagree really, because he’s got the academic background. I mean, he sounds such an interesting person. He’s been the Macquarie Fields MP, and Macquarie Fields, for those who don’t know, is part of southwestern Sydney, which is quite deprived. I  remember spending some time there, when I was doing a book with Father Chris Riley, the priest who helps homeless youth. He set up a new project there and I spent a lot of time out there. It was quite shocking in the old days. There was very little for young people to do. There was just no money; the housing was crumbling. It’s improved a huge amount in the last 20 years, but it’s still a community that needs a lot of help. So to be their MP; it would have been quite hard, I think, for him.

Jimmy  11:46

He would have been around a lot of apartment blocks then, you would imagine.

Sue Williams  11:50

Yes, absolutely.

Jimmy  11:51

Unlike many of his predecessors, who you sometimes think might never have set foot in an apartment block in their lives. I mean, he would have been aware of the issues around apartments, so that’s something. I mean, this is a guy who arrived from Laos at the age of six, unable to speak English. According to his own bio, in learning to speak English, he started to understand the value of education, and then got himself educated to a very high level. So it could be interesting. I think it’s going to be a different perspective. Interesting also, that he’s going to be the Minister for Building.

Sue Williams  12:35

It’s good putting those two together, really.

Jimmy  12:37

And that puts him right in David Chandler’s wheelhouse.

Sue Williams  12:41

If he becomes a real champion for the battlers; I mean, he and David could actually do an awful lot of good together, I would imagine.

Jimmy  12:47

I would think so. And the other person in that sphere is Jihad Dib, who is the Minister for Customer Service, and Digital. He’s basically moved into the Victor Dominello role, before Victor Dominello had to move back into Fair Trading. You’d imagine that those two are working quite closely together. Now, Jihad Dib is the first Muslim to be the MP for Lakemba, when that was even a constituency. And again, we’re looking at people who have experience on the ground of what it’s like for people who live in apartments, rather than nice houses in the suburbs. I think we could see a change in perspective there, from both of those new ministers.

Sue Williams  13:42

Oh, that’d be really fascinating. That would be very, very welcome. I’m actually going out to Lakemba this week, because as you know, it’s Ramadan, and they have the night markets out there; that goes on until April the 20th. So lots of people are flooding out there and meeting people from Lakemba and eating some of the fantastic food that all the little pop-up stalls along the main streets have. From dusk to 3am.

Jimmy  14:10

I’ll be back on the 15th,  if you can hold out for a couple of days.

Sue Williams  14:17

I mean, it’s terrible, but I have actually never been to Lakemba before, so I’d love to have a look.

Jimmy  14:24

We should. Okay, now what was the next item on the agenda?

Sue Williams  14:31

You were going to talk to me about ARAMA.

Jimmy  14:33

 All right. Well, let’s do that after this break.

[MUSIC]

Jimmy

We have heard all this talk about rents and the influence of Airbnb in taking accommodation out of the residential rental market. We’ve had various calls to control or curb Airbnb, but the latest one has come from ARAMA, which is the Australian Resident Accommodation Managers Association, which is mostly based in Queensland. The gentleman there, CEO Trevor Rawnsley, has called for Airbnb to be banned from houses; free-standing houses. He said that the government had been seduced by the sharing economy and added “there is nothing ‘sharing’ about it. Taking houses in the suburbs away from the long-term residential housing rental market, at a time of housing crisis is extremely selfish.” Now, I don’t disagree with any of that.

Sue Williams  15:37

That’s a really weird position for him to take though, isn’t it?

Jimmy  15:41

Well, no, because most of his managers (his customers, if you like), are dealing with apartment blocks. So what he’s really saying (I think), is stop all this residential rental going to Airbnb, and have it all in apartment blocks. Because as we know, people who live in apartments don’t matter. You could rent out a house in the suburbs to Airbnb, and the people next door might not even know that there were tourists in there. But you rent an apartment on Airbnb and everybody in the building knows that there are tourists in there.

Sue Williams  16:24

I suppose that comes from Queensland; starting off their strata legislation, because it was all about holiday rentals, really. You know, it’s kind of funny… I mean, short-term accommodation platforms like Airbnb have had so much criticism because there’s clear evidence that in those areas where so many apartments are let out on Airbnb, there’s incredible accommodation shortages and rents have been going up. You kind of think well, he’s trying to make it look as if they really care, but not really damaging their base.

Jimmy  17:08

There was a story about a year or so ago… I mean, as you were saying, the residential apartment market in Queensland was based on holiday lets years ago. We’re going back to when they first started putting up high-rises there. And then that iniquitous system of long-term 25-year management contracts came in. Those managers on those 25-year contracts, that’s ARAMA’s base; that’s their people. Now, they boosted their income, by managing the rental roll. For a long time, nobody else was allowed to manage the rents in apartment blocks, apart from the residential caretaker manager (which is another screwy system, which just benefits one little group, at the expense of everybody else). So that law was changed a few years ago, so that the residential caretakers were the only people allowed to have an office doing rentals in the building. But anybody else could do it; you could set up an office across the street and do rentals in those buildings. Then along came Airbnb and suddenly, people were able to basically run their own holiday rentals and their own apartments, without even having to go through rental agents, either in the building, or outside. That has seriously punched a hole in the income for these residential managers. This is the thing that puzzles me about Mr. Rawnsley’s pronouncement; if he is saying Airbnb should be pushed into apartments, that’s going to undermine the income for members of ARAMA, isn’t it? Unless his members are using Airbnb to promote the rentals in their buildings, which is quite possible. They could be acting as agents in that regard. Wouldn’t you think?

Sue Williams  19:08

I think it would, really. It’s funny; the last time I spoke to him was a couple of months ago, when I was doing a story about those 25-year management contracts that are still legal in Queensland. He was saying that the system is a good one. He said long-term contracts mean long-term efficiencies. He was saying that the system needs only some minor reforms. So when he’s talking about minor reforms maybe, he’s thinking about this, which is a bit weird.

Jimmy  19:42

Long-term contracts make long-term efficiency, if the contract is efficiently operated. Long-term contracts where there are inefficiencies mean long-term inefficiencies. I mean, it’s a piece of nonsense. Who right now, has a 25-year contract for anything? I bet he doesn’t even have a 25-year contract to be CEO of ARAMA. I’m sure he’d like one. But if he went to his board and said “hey, you know we’ve got these management contracts? I’d like one of them for me,” I think he’d be shown the door. It’s inequity and iniquitous. There you go!  I almost got those big words; I just have to remember how to spell them.

Sue Williams  20:27

It was interesting; when I was talking to him, I mentioned to him the building that we were talking about, that had a fee for lift maintenance, even though there weren’t actually lifts in the building. He said “it just means that contracts have to be scrutinised better.” It’s crazy, really.

Jimmy  20:49

As we know, people in Queensland who have tried to have the contracts changed, or who hadn’t been getting the service and tried to get them rescinded; it’s almost impossible. The whole system there is geared to maintaining these contracts, come hell or high-water. Those contracts have to be maintained, to maintain the system. It’s a system that’s fundamentally corrupt, in the broader sense of the word ‘corruption;’ that it is wrong from the bottom up. The thing is, they’re stuck with it. The government doesn’t know what to do about it and once again, it comes back to the gutless politicians, who don’t even want to look at it, because it’s too hard. On that note, when we come back, we’re going to talk about houses falling down. That’s after this.

[MUSIC]

Jimmy

And we’re back. So it’s not just apartment buildings that are falling down, Sue Williams?

Sue Williams  21:52

No. The house in Condell Park, which collapsed in Sydney on Good Friday… The family were asleep in the house, in their new rental. Thankfully, they didn’t buy it. It was built only months ago, and it started collapsing around them. Oh my god!

Jimmy  22:09

I saw the pictures; it was quite dramatic and spectacular. Do they know why this happened? Does anybody have any idea?

Sue Williams  22:17

No, they’re investigating now. The fact that it was such a new house as well, it’s incredible. The neighbours next door heard the bang, and rushed out; they thought a car had crashed into a house, or something and they rushed out to help. Now they’re really worried, because their house was built by the same builder. People are doing lots of investigations and maybe, David Chandler is involved as well, to see what exactly has happened. It must have been a poor build, but we can’t really say that for sure yet, because we haven’t seen the results of the investigations.

Jimmy  22:57

Does David Chandler take houses; do they come under his remit? I mean, it’s ‘Building Commissioner,’ not ‘Apartment Building Commissioner,’ so you would think ‘yes’ would be the answer to that.

Sue Williams  23:09

You’d imagine so wouldn’t you? You couldn’t really just distinguish between them. He’s got to use most of his time as productively as possible and obviously, apartments house an awful lot more people than individual homes. But yes, I would imagine he’d be champing at the bit with this one.

Jimmy  23:28

His job predominantly, is to get builders to build better buildings. And that is done by controlling (forcing) them, to try and get some sort of approval rating, to prove that they’re good enough to get insurance. But we do tend to think of this as happening to apartment buildings, because so many people are affected by them. These builders, they don’t just build one house and move on. You know, it’ll be a whole housing scheme for some of them, and they just build dozens of houses. It seems to be same template, same methods. But as a builder told us once, you go to the show house for a new development, and they show you this house that’s been built by the very best trades people that they can hire to build their show house. You go in and it looks fantastic. But then, when they have to replicate that 20, or 50, or 100 times, it’s just whoever they can get their hands on, to come in and do the work. And there’s been a shortage of tradies since COVID, as well. How old was this house? I didn’t catch that.

Sue Williams  24:38

It was only a few months old. Let’s hope they didn’t also build apartments.

Jimmy  24:51

And on that note, I’ve got to start getting ready for my next flight and you’ve got to go and do whatever you’re going to do, back in Sydney.

Sue Williams  25:01

Well, nice to talk to you Jimmy and have a good flight. I look forward to doing this in person with you next Sunday, when you’re back in Sydney.

Jimmy  25:08

Yes, I will be. Let’s make a date and we’ll do that then. Thanks for setting this up, Sue.

Sue Williams  25:14

 Pleasure.

Jimmy  25:15

And thank you all for listening.

[MUSIC]

Jimmy

Thanks for listening to the Flat Chat Wrap podcast. You’ll find links to the stories and other references on our website 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 favourite podcatcher. 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.