There’s some good news, some bad news and some great news in this week’s Flat Chat Wrap.
The good news (for investors) is that apartment prices and rents are going through the roof in Brisbane. The boom is apparently being stimulated by preparations for the 2032 Olympics and an influx of new residents.
Of course, what’s good news for investors is generally bad news for tenants and not only are they facing rising rents and shortages of available properties in the Sunshine State, they might think twice before escaping to Victoria.
There rents are rising but properties are falling, as in falling apart. An “undercover” inspection of properties offered for rent in Victoria, by the Consumer Policy Research Centre (CPRC) and Tenants Victoria, revealed one-third of them failed to meet some of the basic living or safety standards.
But if you want to get away from all the doom and gloom, our Lock Up & Leave this week is a half-price, food and drink included, no-kids stay in a fancy hotel in Sorrento – the one in Italy, not the one in the Mornington Peninsula.
All that for $2k per room – less than a long weekend in a party flat in Docklands. It’s all in the Flat Chat Wrap.
TRANSCRIPT IN FULL
Jimmy Thomson 00:00
Before we get going, I wanted to quickly apologise for what might be poor sound quality, once we get started. Sue was away today. I tried to contact her through Zoom; it wouldn’t allow me to use my usual fancy microphone, which I’m using now. So the sound quality may not be as good as you expect it to be. It could be okay, because buzzsprout, which is the platform that hosts our podcast, actually cleans up the sound pretty well. However, in case it isn’t top-notch, that’s the reason why. Enjoy the podcast!
Aren’t computers terrific? They’re wonderful when they work and they’re worse than useless when they don’t. I’m saying this, because it’s taken me about an hour to connect with Sue Williams, who is… Where are you, Sue?
Sue Williams 00:57
I’m in Lithgow, just a couple of hours west of Sydney, so it shouldn’t be that hard, should it, really?
Jimmy Thomson 01:02
We could probably do it with a couple of tin cans and a piece of string. But no, we have to use Zoom, which has this playfulness about it, where every time you log into it, it changes settings and so you have to start from scratch. We’re going to talk about a bit of a rental crisis in Victoria, which has been exposed this week. And for Victorians who are sick of renting, well they can always go and buy in Queensland, couldn’t they?
Sue Williams 01:32
Well yes, they could, but it’s not terribly cheap anymore in Queensland sadly, but lots of Victorians are going there.
Jimmy Thomson 01:42
And we will have a fairly exotic ‘Lock up and Leave’ in Europe this week. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.
Sue Williams 01:52
And I’m Sue Williams and I write about property for Domain and the Sydney Morning Herald and Age and the AFR.
Jimmy Thomson 01:57
And this is the Flat Chat Wrap. Rental crisis in Victoria; now, we had Angus Abadee from New South Wales Customer Services… Fair Trading, that kind of area, saying a couple of weeks ago on this podcast, that Victoria, in terms of identifying and dealing with defects in apartment blocks, is about five-years behind Sydney, or New South Wales generally. Is that starting to surface, do you think? In a report that you found; who’s the report from?
Sue Williams 02:44
The report was from the Consumer Policy Research Centre, and they did it together with Tenants Victoria, and this was about all renters. You know, renters obviously are paying huge rents at the moment all around the country, because there’s such a crippling shortage of housing. And this survey; lots of undercover people went out and they were posing as potential renters. They inspected a hundred rental properties in outer Melbourne and Bendigo and they wanted to test how they fared under the state’s minimum rental standards last year. A majority of the homes seemed to meet the standards, but about a third of them (which is a huge number), didn’t meet the minimum standards. Isn’t that terrible? People paying huge rents and the places they’re living in just aren’t up to scratch.
Jimmy Thomson 03:35
There was a story on the radio about a woman who’s ceiling fell in and basically, she thought that the landlord would automatically find her somewhere else, or give compensation, like reduce her rent, while the ceiling was being fixed and she discovered that no, there’s nothing automatic about it. You have to go to the tribunal and say “can I get my rent reduced?”
Sue Williams 03:57
Oh wow! So you’re living without a ceiling?
Jimmy Thomson 04:01
The story goes on… It’s on the ABC Radio website. But the story goes on to say that the landlord’s agent came in and made it safe and did running repairs and things, but you don’t want that going on in your house, when you’re there. I don’t know if you’ve ever been in a room or a house or a flat where the ceiling has come down? It’s disgusting. I mean, it really is. What is lurking above our heads is horrendous. Years and years of accumulated dirt and dead insects. It’s just not at all nice.
Sue Williams 04:40
I know whenever fire alarms go off; you know, when the sprinkler system turns on and if ceilings get damaged, that can cause incredible damage, because of exactly that. Water might pour in through the ceiling, and it’s black water, just carrying the fungus of many, many years. Coincidentally, we were both watching that fabulous TV drama, The Bear last night, and the guy had a broom… Well, you tell the story, Jimmy.
Jimmy Thomson 05:11
He basically said that if there was mould in this room, the ceiling would have collapsed by now and he tapped the ceiling and it proceeded to pour decade’s worth of filth on top of his head. Sorry, if that spoiled it for anyone, but it’s worth watching.
Sue Williams 05:27
So this survey found that more than a quarter of the homes that they inspected had maintenance issues, including visible mould (which is the mould you were talking about), in nine of them. And I mean, mould, as you know, is really toxic, and can do incredible damage to people’s health, especially black mould and it’s really difficult to get rid of, as well. We know so many landlords, when they do discover mould, they tend to paint over it. My niece is in a rented house that’s had many coats of paint over the mould, over the years. And you just worry about people’s health. Fifteen of the houses they looked at (and this is only out of one hundred), had failed heating systems. Twenty-six didn’t have the right smoke alarm placements and ten had no window coverings or curtains, so people were having to live out their lives in the full view of everybody else, which is really awful, isn’t it?
Jimmy Thomson 06:28
And there’s another aspect of this, which is, since they changed the rental laws in Victoria to make them friendlier to tenants, there’s been a lot more applications to the tribunal. Apparently last year, VCAT was absolutely swamped, so if you do have a problem with your tenancy, the chances of it being heard quickly are seriously reduced. Now, having said that, the Victorian Government; they have this thing called the Dispute Resolution Centre, which is a bit like Fair Trading’s Mediation Service. So it’s a free service when you’re in dispute with your landlord, or your neighbour or whatever, you can go along, and they’ll try and resolve it, or help you to resolve it. They brought that in to help deal with the backlog of work that the tribunal was facing. And then this strange thing happened… They closed it down on December the 30th last year, and opened it up again on January 29th, or something like that. Basically, it sounds like they’ve gone “we are not coping; we are just not coping with disputes the way we should. We need to fix it,” and it sounds like they just stopped it for a month, upgraded their phones, their computers or whatever, trained their people up and then said “okay, right, at the beginning of February, off we go; we’re ready to go again.” It’ll be interesting to see if it makes a big difference, because sometimes, these help centres; they’re a bit like when there’s too much traffic and they build a new road and that attracts more traffic, so it never solves the problem.
Sue Williams 08:16
Then again, help is really needed, because I think everybody knows that tenants tend to be really quite nervous of complaining and reporting difficulties, because they’re really scared, particularly in the environment now, that they might be kicked out of their rental as a result. Many people are putting up with sub-minimal conditions, in order to stay in their rental accommodation, and also in fear that their rent might go up again and it’s pretty unaffordable as it is. It was interesting; we were talking to somebody (I think it was from Tenants Victoria), and they said “well, maybe if you have an investment property and you want to be a landlord, you should actually have to apply for a licence. And on that licence, you should be qualified to say ‘I will always fix stuff that needs to be fixed, or fix it myself, or get in a proper tradesperson.'” So you’re actually a right and proper person to own a property, to let it out to someone, because you’re earning quite a bit off of it. And if you’re not earning enough off of it, you’re getting negative gearing, so maybe among those rights and responsibilities, we should have something legislated, as well.
Jimmy Thomson 09:25
But who’s going to police it? That’s the real issue, I think. You have a complaint in tenancy, or you have a complaint in your strata scheme… You have a complaint with your developer, you are expected to go and hire a lawyer, to come and argue your case and the same applies in tenancy, you are expected to apply to the tribunal, to get them to enforce the law.
Sue Williams 09:49
If they risk losing their licence, and then they might not be able to have an apartment again to let out for awhile, while they’re on probation…
Jimmy Thomson 10:02
I think a much simpler system would be to say “look, there is an agency here that you can go to, that will investigate your claim and will issue fines and let the landlord go to the tribunal, to have the fine repaid.”
Sue Williams 10:18
If they feel it’s unfair. That’s the same as the thing with pets now in Victoria. Landlords now have to accept pets, and if there is a problem with pets, they have to go to a tribunal, I think and argue why they don’t want to accept pets. So yes, that kind of puts the boot on another foot, doesn’t it?
Jimmy Thomson 10:40
I think there’s only been two or three cases that have been heard at the tribunal from landlords, demanding the right to refuse the pets and I think none of them have prevailed. It’s just people feel entitled. “This is my property. I can do what I want with it.” And then it turns out “well, if you’re getting somebody to pay to live in your property, it’s not 100% yours anymore.”
Sue Williams 11:04
Jimmy Thomson 11:05
But you know, this whole question… I mean, our experience in New South Wales, with building defects; we’ve seen them over the years and partly because people like us were not prepared to sit in silence and were not prepared to pass on our problems to the next person who bought the apartment… Gradually, it’s become more apparent that there are huge numbers of serious defects in buildings in New South Wales. I find it hard to believe that there aren’t the same issues in Victoria, but we just don’t hear about them.
Sue Williams 11:40
Yes, absolutely. Hopefully, with New South Wales getting this sorted out now, hopefully, with the New South Wales Building Commissioner, and other states actually looking at the Building Commissioner’s model in New South Wales and thinking about doing something similar…Hopefully, the situation will be a lot better in future.
Jimmy Thomson 11:59
I think it’s got to get worse, before it gets better. And I mean, one of the problems there quite clearly, is that the government doesn’t want to know and the media is not interested, particularly in exposing it. The strata management schemes in Victoria… I mean, the recently retired president of the Strata Community Association in Victoria, Julie McLean, famously said that all you needed to be a strata manager in Victoria, was a heartbeat and a mobile phone. And she is a strata manager, but she was despairing of the fact that it’s so easy for under-qualified or under-trained people to register as strata managers, and then make it up as they go along. And they would find out very quickly, that if they tend to favour developers over owners and tenants, they’re going to get along fine in making money and issuing Schedule-B fees and things like that. We’ve got to keep an eye on Victoria; things are to change there, I think it’s safe to say. When we come back, we’re offering an escape route for Victorians who want to get out, before it all falls apart.
Sue, you are always keeping an eye on the property market; it’s part of your job and you’ve got some exciting news on what’s happening in Queensland.
Sue Williams 13:33
Oh, well, it was exciting for some, but not exciting for others. It’s not exciting for tenants in Brisbane; they’re having a really tough time, because the vacancy rate in Brisbane is really low. And also, rents are pretty high, as well. But for anybody looking to invest in an apartment, Brisbane is the city to invest in, because apartments aren’t as expensive as they are, say in Sydney, and some other places around the country, like Byron Bay, but the price is growing quite strongly, which is good news for investors. A lot of that is because of all the investment in infrastructure that’s happening in the run-up to the 2032 Olympics, which is going to be happening in Brisbane. I mean for investors, they’ve had a 16.7% rise in rents a year. That’s incredible, isn’t it? And that dwarfs even the rise in rents for houses, which is just 9.1%, which is still pretty high. So really, if you are an investor and you want to buy an apartment, go to Brisbane and buy one there. Prices are strong, and the returns are incredibly good, in terms of both capital values and rental yields. I think the population in Brisbane is growing quite strongly and that started off during COVID, when lots of people went over there from other states.I mean, it’s population growth rate is 2.3% at the moment, which is over double that of Melbourne, and more than three-times the growth in Sydney and yet it’s only got half the population. It’s incredible.
Jimmy Thomson 15:17
I would just caution people about buying apartments, especially in the holiday areas of Brisbane and Gold Coast; places like that, because this is where that whole rort of presale of management rights… If you were buying into a building in New South Wales or Victoria, and you looked at the figures and thought “these guys are overpaying for their building managers.” You think “when the building management contract is up in three-years, we’ll get rid of them; get somebody else in.” If you’re buying into a building in in Queensland, you could be buying into a 25-year contract that you cannot get out of.
Sue Williams 16:03
Absolutely. And I think that’s a caution that’s particularly strong for say, the Gold Coast, which is a big holiday area. Not so much in the city of Brisbane, I wouldn’t have thought.
Jimmy Thomson 16:13
I mean look, developers are going to their local council and saying “we want to build a block of holiday units, okay?” And councils in Queensland are notoriously friendly towards anything to do with holiday lets and by saying it’s going to be holiday rentals, they can get a 25-year management contract. Otherwise, if it was residential, it would be 10-years maximum, which is still too much. The developer then sells that contract to a company and these pre-sale contracts… You want to take a guess at how much pre-sale contracts, or the trade in pre-sold management contracts… Want to take a guess at how much it’s worth nationally in Australia?
Sue Williams 16:59
Jimmy Thomson 17:00
Sue Williams 17:00
Jimmy Thomson 17:02
Sue Williams 17:04
Jimmy Thomson 17:05
Sue Williams 17:05
Oh, my God! I thought I was being ridiculous saying 2 billion! Oh, that’s horrendous, isn’t it?
Jimmy Thomson 17:12
You can see why it’s so difficult for people who want to get it changed. I mean, even Strata Community Australia, the strata managers in Queensland, who are notoriously conservative (or have been in the past), are now campaigning to get this changed. But what’s stacked up against them is that the banks; the developers are making money for nothing, right? It doesn’t doesn’t cost them anything to not sell the management contracts, or it doesn’t cost them anything to sell the management contract. They don’t want to give it up. The banks don’t want to give it up, because they lend people the money that they borrow to buy the management contracts. The people who end up paying at the end of the day, are the people in the apartment blocks, who are not only paying (let’s assume), reasonable fees for the management of the building, but they’re also paying a premium, to cover the cost of the loan of the person who bought the management rights. It’s just such a scandal; not allowed anywhere else in Australia, only Queensland. And that’s partly because of the history; apartments in Queensland were originally built to accommodate tourists, basically. People doing it on almost a time-share thing, where they would go and stay in the apartment on the Gold Coast for three-or-four weeks a year and then let it out to tourists for the rest of the time. This predates Airbnb. And that was how the system was set up and to some extent, there’s logic in saying “well, you’ve got to have a manager in there, to manage all this,” because most of the people aren’t there most of the time. Now, it’s such an anachronism and they don’t know what to do about it. They know they should do something about it. I think a lot of politicians in Queensland would like to do something about it, but they’re stuck with it; they can’t do anything. And meanwhile, the caretaker managers are running around buying and selling contracts worth $8.4 billion. I’m proudly posting that, by the way. That’s where I got the figure from; it was from their website, going “hey, we’ve reached $8.4 billion in trade this year!” They’re shameless, utterly shameless. Okay, we’ve trashed Queensland, we’ve trashed Victoria; time for something a bit more positive. When we come back, this week’s ‘Lock up and Leave’ will take us to Italy. I feel like we should have some accordion music there, but nevermind.
Our ‘Lock up and Leave’ is a bit misleading, because we were talking about Sorrento and Sue, you mentioned there’s a film set in Sorrento, which is called…
Sue Williams 20:04
Hotel Sorrento and you pointed out Jimmy, that it’s actually set in the Mornington Peninsula, in Victoria.
Jimmy Thomson 20:13
Yes. It’s a famous Australian play, about three sisters. I think the Hotel Sorrento is their restaurant or cafe. But this is real; this is the original Sorrento in Italy, which is at the Bay of Naples and near Mount Vesuvius. Which means it’s less than an hour’s drive from Pompeii, which is of course, the Roman city that was buried when Vesuvius erupted a couple of thousand years ago. The Vesuvius is the only active volcano on the European mainland and it still rumbles away. Occasionally, it sets out a little puff of smoke, just to keep everyone on their toes. But that part of Italy is just gorgeous; just stunning.
Sue Williams 21:07
Absolutely. So what does the trip do; how long is it for?
Jimmy Thomson 21:12
Okay, it’s near the Sorrentine Peninsula, and the Amalfi Coast. It’s a hotel caalled the Grand Hotel La Pace Sorrento. It’s an adults-only resort, and the deal is $1,999 Australian dollars per room, for 5 nights, which is half-price.
Sue Williams 21:41
Oh wow! Sounds really nice!
Jimmy Thomson 21:43
It’s Luxury Escapes that are organizing it and they are a pretty good tour compaany, arent thhey?
Sue Williams 21:49
Yes, they are.
Jimmy Thomson 21:51
So you’re going to be well looked after. You can go onto the Mild Rover website and you’ll see all the details there and you’ll get a link to how you can actually book a holiday there. But you know, it sounds really kind of indulgent for grown-up travellers. You’ve got this fabulous big hotel, old-fashioned marble lobbies, grand-staircases, all meals and free-flow drinks all day, and nightly entertainment. That’s all part of the package.
Sue Williams 22:29
Beam me up, Scotty!
Jimmy Thomson 22:32
And you don’t have kids running around, screaming their heads off when they don’t get exactly what they want, whenever they want to. It sounds good. Actually, if I wasn’t sitting here doing this, I’d love to be over there, doing that.
Sue Williams 22:46
Jimmy Thomson 22:48
Okay, well, enjoy the rest of your short stay in Lithgow. It’s not Sorrento, I know that.
Sue Williams 22:56
No, and it’s very, very cold here, as well.
Jimmy Thomson 23:02
You’re on the mountains there; it’s got its own weather system. Thanks for taking some time out to talk to us. The Zoom call is about to run out, which is just in time. Thank you Sue, thank you for listening and we’ll talk to you again, probably both in Sydney next week. 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 or your favourite 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.