Residential tenancy law reforms seem to trigger “intense concern” about divestment in the property market even more than policy interventions that deliberately dampens investment, according to a study Australian Housing and Urban Research Institute (AHURI).

The study found, however, that while the prospect of reforms may cause some would-be investors to hold their plans, the analysis of reform interventions in New South Wales and Victoria does not support the contention that tenancy law reforms have caused landlords to disinvest.

The two reforms analysed were the enactment of the Residential Tenancies Act 2010 in NSW and the commencement of the 2015 Victorian Fairer Safer Housing review.

According to the study, the reforms in NSW had no negative effect on the trend of private rental sector entries. However, it had a negative effect on exits — this means that there were fewer divestments after the reforms were rolled out.

In Victoria, there is a negative effect on the trend for entries, which means that there were fewer investments after the review commenced. However, the reforms did not have impact on investment exits.

These are the other highlights of the study:

  • Rental bonds data from Sydney and Melbourne showed that rental properties seem to stay in the market for only five years.
  • More than 30% of tenancies commence in a property that just entered the private rental sector.
  • Over a quarter of tenancy terminations also see the property exit the sector.
  • Private rental ownership is dominated by the household sector, which has gradually widened (which means more owners) and deepened (which means owners started to own multiple properties).

What landlords have to say about rental regulations and investment

Investors surveyed by AHURI reiterated the dynamic conditions of the rental sector.

The study found that many investors engage in investment repeatedly while others own multiple properties. Other investors even own rental properties that are interstate.

Furthermore, there is a strong level of interest in short-term letting.

Meanwhile, the study also found that when investors decide to invest, the prospective rental income and capital gains are the most important reasons.

Tenancy laws are also an important consideration, but they do not influence decisions on disposing of investment properties.

Interestingly, the study found that majority of investors support propositions that tenants should feel they can make their dwelling their home and stay as long as they choose.

Investors also support tenants being able to keep pets, and landlords being required to maintain dwellings to minimum standards.

Photo by 89Stocker on Canva.