Hello and welcome to It All Adds up the podcast. So we chat about money, how to get it, how to spend it and how to invest it. I'm money and a dumb pal. And you're listening to our summer series. Well, we're playing some of our hottest hits to help you get in shipshape financial form for 2023. It all Adds Up will resume normal programming in February with a brand new season full of money saving tips and insights. So
until then, sit back, relax and enjoy. Hello and welcome to It All ends up the podcast where we chat about money, how to get it, how to spend it and how to invest it. I'm money editor Don Powell.
And I'm senior economics writer Jess Irvine. It's no secret, of course, that interest rates are going up and up and up as the Reserve Bank battles to counter rising inflation, which is really putting the squeeze on home owners and property investors, as we know.
Yes, And look, we've talked about this extensively. We talked about this in many previous podcast. It gets written about all the time. You know, owners are struggling with rising interest rates. But there's also another side to this, which obviously just doesn't get quite the same level of coverage, which is how this impacts renters.
Exactly. Yeah. Look, we know the majority of Australians, about two thirds are just a little bit over two thirds of Australians are homeowners. But, you know, the rest are renters and typically are made up of people who are younger and also people on lower to middle income. So it's really important that we keep talking about rents and what's going on there because we know that rents have jumped on average 10% this year alone and are up
about 20 to 30% since 2020. So ouch. That is also a lot of pressure on on renters.
Absolutely. So look, this episode today is going to be about renting and your rights as a tenant, because I'm sure any of our listeners who are renters, many of them may have been given a rental increase in the past couple of years. It's becoming more and more common. So we're just going to talk about what you can do and the sort of rights that you have when that that does happen. And, you know, maybe you can use some of these tips to to hopefully negotiate a
lower rent or maybe no increase at all. But I thought just just to start off, we can talk about maybe why rents are going up, because it is linked to two interest rates to a certain extent. But there is some other sort of factors as well. So obviously, you know, Australia is a is a broad and vast country. We can't talk about every single state and territory in great detail. So I'm sorry for any of our listeners that are in other states, but we are just going
to focus on on Melbourne and Sydney today. But the story is broadly the same pretty much everywhere you look. But if you look at a house in Melbourne, the median rent for a house in Melbourne is at about $160 a week, which is up at about 7% on last year. And in Sydney it's worse, it's the median rent is about $620 a week, which is up 12% on last year.
Yeah, that's really interesting. I remember before I bought my place I was paying about 650 a week in Sydney, inner Sydney for a two bedroom property, so I thought that was sort of at the premium end, but seems like that's about average now. Yeah, So there's a lot of talk about what rising interest rates mean for renters and it's something that I've asked economists about in the past, like is it do rising interest rates mean that rents also go up because, you know, it's more expensive for
landlords so they pass it on. And I've actually had some pushback from that to say that, yes, that's a cost for landlords, but they can't just come up to you and say, my interest rates have gone up, so therefore, hello, I'll have all that extra money please, from you in rent. We should assume that the rental market is determined by the forces of supply and demand like any other price.
That's how it's set. And economists always think that the landlords have their rent set at the maximum that the market can bear before they will turn off, you know, potential renters. They will have been trying to get, you know, maximum rents. So just because rates have gone up doesn't mean that they can now just pass it all on because eventually tenants will walk away from the properties. However, I think that sort of fails to capture what happens
in reality. I think that when rates are low, I think landlords perhaps do let things slide a little bit. If they've got a good tenant, they're not going to be sort of increasing the rent every year. They'll just think I'll let it slide. And then when we do get a period where the landlords are getting those massive rate increases, they do focus again on rents and trying to get the maximum amount. So maybe what we're seeing when interest rates go up is landlords are really going
to give they're going to give it a go. You know, they're feeling the pinch. So, you know, maybe they've let things slide for a couple of years. Now might be the time when they do come back to you and say we need to recoup some of the higher costs. But again, keep in mind that only as much as you can afford, they can't ask for anything. Otherwise you will you will move out and you will go find other options, whether because you want to or because you have to.
And look, we'll get into, you know, the options that you do have when when they increase rents or asterism or increase your rents later on. But I think, you know, it is also worth noting that obviously interest rates to effect, you know, all economists may not think it, but there is you know, there is obviously a direct impact there in terms of interest rates and and rents. But there's also the fact that we've had this fairly unique sort of situation with COVID over the past three or so
years where there's been a great shift to the regions. Right. Everyone's wanted to get out of Melbourne. And Sydney and move out further afield. That's put a massive amount of pressure on property markets in regional areas. So therefore there's just not as many rental properties as there once were. So you have this record low national the national rental vacancy rate is at 0.9%, which is a record low. And that's that's not much there when I was really small.
Well, and you might think that it would have gone the other way because we closed the borders. There was basically no migration which would hurt demand. But you're right, people were moving out into other regional areas. They wanted a bit more space. Maybe they were moving into places with more bedrooms. And interesting data from the RBA showed that actually being forced into lockdown in your household led to many share houses dissolving.
Yes.
Yes, I know. People went, Ah, I'm not staying at home with four or five flatmates. I'm going to move in with my partner. And actually household sizes got smaller and if there's fewer people per household, you need more of them. So that actually increases the demand for property.
Prior to COVID, I had a house of five people, and as much as I love all those people in that share house and still do. If we had been in that share house during COVID, we would have gone insane. So I understand why that sort of angle where these houses all sort of dissolved. And you know what? Five people living in one house becomes a bunch of different people living in three houses. So there's all these factors
that have that have sort of come together. And we are in a true, true crisis when it comes to the availability of rental properties in Australia. So yeah, rents are rising. There's very few rental properties. You know, real estate agents are quite pushy in terms of the suggested increases they come to like, I don't want to come too hot against the real estate agents here, but at the same time they can be very suggestive in terms of, you know, telling the landlords to increase their rents and
all that sort of stuff. So there's that aspect as well. There's a bit of a power imbalance here, I guess, when it comes to the whole, whole market. And, you know, it's not looking like it's getting much better.
Yeah. And economics does have another concept called the principal agent problem, which is that the more sort of layers you get between two people in an interaction, the more heartless it becomes essentially because you've got, you know, many people are not dealing with the landlord, you know, the tenant and the landlord are not dealing face to face in many cases. And the real estate agent just wants to. Well, I think they get paid like a percentage of the rental.
They do probably get paid more if they get the rent up. So they're trying to do that. Yeah. And it feels like in Australia we just, you know, there is a bit of a new battle between landlords and renters and I know a lot of like younger people of my generation do I get to still be young? I'm not sure there's an ethical question around like will I become a property investor? Because, you know, some of the tactics, you know, the way that tenants are traded
are so poor. It's almost become an ethical issue of, well, maybe I'll invest in shares instead because I just don't think I should be in that market or I shouldn't be taking home from a potential first home buyers. I
heard a great term hashtag, not all landlords. So as someone on Instagram I follow who was talking about ethical property investing and you know, she was a younger investment property owner and sort of talking about, you know, re forging that bond between landlords and tenants and like she would buy Christmas presents for her tenants, you know, and just check in with them and, you know, attend to all the repairs. So hopefully it's not all landlords.
But yeah, I do I do think I mean, I think that that sounds great, but I think that is probably like a minority. You know, I definitely think there's a big part where the human aspect of the rental agreement relationship is completely forgotten. But you're right, there is this massive sort of disconnect which leads to these really cruel sort of situations where renters who house for them
is part of their livelihood. It's it's an essential part of of living are getting, you know, kind of done by these these landlords who just view it view it really as an investment.
Yeah. And look, the policy settings are all wrong. And, you know, in other countries like Germany, they have sort of like it's typically you would be in a property for ten years at least and like it even there like you go and you take your own kitchen with you and have it installed because you expect to be there for so long. But you know, our tech settings sort of favour mum and dad's or, you know, smaller investors sort of, you know, having a crack, trying to
build that multiple property portfolio, selling out. It's not, you know, the, the large institutional investors that we have overseas where it's sort of a more manageable thing of trying to keep occupancy rates, you know, across the board. It's really we're kind of, you know, fisticuffs a little bit between sort of smaller, you know, people dealing in this market.
Yeah.
Alright, So I'm so let's get into the nitty gritty of what sort of legal rights that tenants do actually have. So if your landlord is showing up in the next couple of months or if they already had asking for the massive rent rises, let's have a look at what sort of legal rights you have. And again, we're going to sort of focus again on Melbourne and Sydney just because, you know, it does vary by state to state. So folks.
The thing on Victoria and New South Wales. What is the deal, Dom, with if you're on a fixed term agreement, what rights do you have there? Like you've signed up for the 12 to 24 months.
Yeah. So in both Victoria, New South Wales and I do believe this is like broadly the same across most states, But again, caveat check it. But you know, they can't increase your rent during a fixed term agreement unless the lease states otherwise. And then in that lease it has to also not only state that they can. It has to state how they're going to calculate that rent rise
if they do decide to raise it. But broadly, what this means is that if you're on a fixed term agreement, you don't really have to worry too much about rental increases. But sadly, this is not the case. Like a lot of times, you know, you get onto a fixed term agreement first, six or 12 months and then once it stops, they just put you on month to month because it's easier for them. And usually it's actually easier for the
tenant as well in terms of moving out. So a lot of people are actually on on month to month agreements and on month to month agreements. Your landlord can't increase your rent more than once every 12 months, though it is very it is important to point out that if you're in Victoria and your lease agreement is pre 2019 before 2019, they could do it every six months. So it's worth checking when your lease agreement was signed because if it is prior to 2019, they can come
and increase your rent every six months. So but by and large it's it's every 12 months and they can only do it once every 12 months.
And one thing on the fixed term agreements, it's not okay for that agreement to just say we're allowed to increase, you know, once at the end of the first year in line with market or just, you know, in line with general forces. It has to be more specific than that so that they can't see you're not exposed to an open ended sort of, you know, what is the market value type thing in your fixed term? Are there
any limitations on like percentage increase? Like what's excessive is is there any like you can't put it up by more than 50%?
Look, there's no specific laws as far as I can tell. But I think the general rule is that it has to be reasonable, has to be a reasonable increase. So they can't come and say, oh, you're paying an extra $500 a week now because that's outrageous and they have to give you information as to how they've calculated the increase.
So a bit like what we said with the fixed term agreements, they have to come to you and say, well, we've done this and we think it's because, you know, rental rent in your area has gone up this much. The property value is going up this much. They've got to give you reasons for it. They can't just come and say, this is your rent now, bad luck, you know, see you later sort of thing. So there's there's that. And they also have to give you 60 days written
notice about the increase of the rent. And another thing worth pointing out is that they can't increase the rents. Again, this is true in Sydney and Melbourne. And I think again, broadly it's true everywhere. They can't increase the rents to
penalise you. So if you've done something they don't like, like, you know, maybe through a raucous party in the neighbours complaint, they can't come in and go, Well you've done that in the end and now we're increasing your rent and that's not a good enough reason to increase in rents. They have to have other other reasons.
That sort of seems like a de facto I've tried to evict you, but by just setting an unreasonable.
Yeah, exactly. Exactly. And did the landlords certainly do that? They definitely will come in and say, well, our rents going up by this much and they're doing that in the hope that you'll leave. But you know, again, that's not great. And this things you can do which which we're going to now we.
Will get to. Yeah. So what what are the first steps that people should do when you when you get that letter or that email. My number one tip is just remember, everything in life is negotiable, including the rent. So it because there is that power imbalance, people can feel really hesitant to sort of push back against rate increases. But you know, we tell mortgage holders to haggle all the time on the interest rate. You got to haggle
on your rent as well. And just because it may come with the impressive sounding, oh, the CPI has increased, but therefore we have to you know, they're having a crack and you can you can push back as well and, you know, negotiate with if it's the real estate agent or the landlord themself, you know, you just you have to tell them if you think it is too high and you're allowed to say, I don't think that's reasonable, you're going to arm yourself with the information about what
you know, what you know, maybe, you know, you don't want to walk to a different property because that lead up moving costs, etc.. But, you know, check what the comparable listings are in your area for, you know, comparable properties, how much they're paying per rent. I used to also ask my neighbours, Absolutely.
There's no like salary secrecy clauses when it comes to rent. You can, you can tell by all you.
Like, so just try to calm yourself with some information. But when you do mount the case that you want to push back and not agree to just what's being asked.
And that might mean that you get the, you know, the increase next entirely, you know, that that might be you maybe negotiate that or maybe you'll be able to go see a smaller increase, which might be a bit more palatable. And, you know, usable.
Yeah. You can push back on the amount or you can also push back or delay when the increase kicks in. So that's another one. Say, look, I need more breathing space. You know, this needs to happen in 3 to 6 months. I need more notice. That's just a way to push back. And you can also try you know what? If I signed up for the 12 month lease, would you get a could I, you know, agree to a lower figure if I am willing to commit to the longer lease, sometimes that can work as well.
These negotiations don't always work out. I think I would hazard to guess that most like most often they don't work out. I think usually there's not a great deal of wriggle room for these sort of things. So the next step you can take is sort of bringing in a third party. And in Victoria there is a free, completely free service where you have to do it within 30 days of receiving this written notice from your landlord.
But you can ask the consumer affairs body for a rent assessment and they will sort of assess the value of the property, assessed the rental market and they can decide if the rent increase is too high or if it's appropriate or whatever. Completely free, but it's non-binding. So what happens? Say like you apply for this free rental service assessment in Victoria, they go, Oh, the rents too high. And then they give that they give that assessment to the to the landlord. Landlord is not bound by that
at all. So they can just go cool. Well we're still going to do it. So I mean it's good to do like it is a good thing to do. And like maybe the threat of getting consumer affairs involved will be enough to sort of, you know, make some landlords back away. But this this free assessment in Victoria is not binding. So the next step, which is sort of the universal step, is to go to the tribunals, which is V Kat in Victoria and Kat in New
South Wales. And again there's corresponding tribunals in every state and territory. And again you have to do this within 30 days of receiving the notice from your landlord in terms of the rent increase. And they do cost like a little bit of money to apply to the tribunal. It's not like the fees are quite reasonable though, like at 65 bucks in Victoria, $54 in in New South Wales. And I think they only get as high as maybe 100 bucks in some of the other states. But like,
they're very they're within the realm of affordability. So don't get too scared about the fact that you do have to pay a fee. They pay quite low.
Yeah, it sounds kind of pretty epic to go to the tribunal and, you know, take it to a legal. Do you have to pay lawyers fees? No, this is.
A great thing. I think you're right. People get really scared and get sort of like quite apprehensive about the concept of taking someone to a tribunal because it sounds really big and scary, but it's really good. They like
they walk you through it. It's very, very renter, friendly, like they're very, you know, in there for you to, you know, give you a hand and sort of because they recognise a lot of people don't understand the legal system, they don't understand, you know, the sort of the nuances of of the renter and landlord sort of agreement so that it's really worth doing. And there's great resources online.
If you go to tenants of Victoria over in Victoria or the New South Wales Tenants Union, if you're in New South Wales, they have these great factsheets and guides about what you should do and what you can do when you want to actually take that step about going to the tribunal. It's just so worth doing and it's much easier than you would expect.
And then those decisions are binding, You know, whatever they decide is what you have to pay.
Yeah, pretty much. So they can, if they decide in favour of you, they can go, Well, all right, Your rent is said at this. This is your rent. Or they can say, okay, well the landlord now can't increase rents for another 12 months. They can impose all these orders on the landlord which you know, they have to abide by. So it's pretty good.
And how long does it take?
They're pretty fast moving. I think it like you can be locked up in it for a few number of months. But I believe that whilst you're in the process of taking someone to a tribunal, the landlord can increase your rents during that time. So while your so there's sort of this sort of amnesty period, I believe, where like if you're sort of currently taking a landlord to speak out or in cat, they can't during that time be like,
well I'm still trying to increase your rent. So it sort of puts a bit of a stopper on the whole thing, which is can be quite useful for a lot of people. But keep in mind that if one of the main reasons why you're sort of arguing for like a no rental increase is because you can't afford it, they don't typically, I believe, take into account your income
when it comes to deciding these cases. Usually it's sort of all the external factors, so that maybe that's a lot of like the number one reason maybe why like I wouldn't say don't do it, but it just means just keep in mind that that's not going to be something they're going to be considering whilst deciding for or against.
Is the tribunal also some way you can take a landlord if they're like not repairing things around the home or they're trying to like evict you because they're selling the property, what is that the place to go for, to protect against those other sort of issues that tenants also have?
Yeah. Like, you know, if your there's a bunch of sort of factors that come into into play here but like if you're not getting any repairs done or if the landlord is selling the home or trying to evict you and they're not following all these proper procedures, like, you know, you can take them to be cut out
and cut and, you know, challenge them over this. Like, you know, there's a lot of like, this is where I recommend people go online and look at these resources that I mentioned earlier in terms of tenants Victoria and New South Wales Tenants Union, because they run through all the things, all your rights in these situations in terms of like repairs, urgent repairs, non-urgent repairs, all that sort of stuff. Like for example, I was reading a story
the other day about someone who took their. Landlord to the tribunal because they had not done any repairs on the property for years and was being treated really awfully. And not only did the landlord then have to go and do the repairs, the tribunal found in favor of the tenant and they got $10,000 in compensation. So you'd like compensation is another thing that you can get from going to the tribunals. So the bottom line is like the tribunal is your friend. Don't get daunted by it.
It is, you know, it's where you should be going. If things are if things are going great at your at your property, it's very rent a friendly. So give it a crack. So our listener question of the week is from Carissa, who says that for many years she's written an annual budget and she's recently graduated that two a monthly spreadsheet which she hangs up on a noticeboard in a kitchen. She was always under the impression that it was better to do an annual budget rather than
a monthly one, because each month is different. But they find themselves that they keep adjusting in different amounts in their phone notes as the cost of living goes up. The situation changes. So they curious about this, the thoughts on an annual budget versus a monthly budget. And just there's never been a better question for you to answer in terms of budgeting. So run run wild with it.
I may have gone through the reader email inbox, then gone. I'm going to talk about this for 20 minutes, but thank you, Chris. It is a great question and my answer is always do both. But, you know, I think people are looking at their budgets, you know, like I used to be this weird person who tracked my spending and tried to figure out if I had a budget surplus. This is actually becoming critical for everyone, whether you're a renter, facing those rent increases or dealing with the interest rates
going up almost every month. And so people are like, how do I write a budget? And the thing I see with budgets is people sort of sit down and go, Oh, okay, I've got my rent, some food, electricity, my phone bill and, you know, maybe 100 bucks for eating out. And they just fail to capture so many of the expenses that do actually come up and hit more irregularly, like the water bill or, you know, servicing your car once a year, going getting an annual skin check or whatever those sort
of big lumpy expenses are. So I do encourage people to try and sit down and figure out over a 12 month period what is everything that can come up for me. And you would be surprised. And people are not going to be perfect at doing this. And so tracking your spending at that monthly level so you're aware of what is coming in and you're going to find one month. You know, you put your car in for service and you need new tires. How you know, how
on earth is that a representative month for me? So, you know, just one month is not necessarily enough to capture all those extra expenses. And in my book Money with just I do, you know, run through a complete checklist of when I went through the ABS data on household expenditure in Australia, which goes to like 7000 items or something. And I grouped it all together so people
could go through that checklist. But I think trying to do both, you know, and and I want to try and normalize this as much as possible since I started budgeting like there is just such this wild community of people who do track their spending, you know, and maybe it's a privilege that I had previously of being on
a high income. I didn't have to look as closely, but actually budgeting, figuring out where your money is coming from, where it is going is a really great skill, and it's one that people are going to need more, more than ever. So and I'm just so excited that Chris has done that. She's hung up on the on the noticeboard in the kitchen, you know, making it visible as well. So let's just normalise budgeting. Tom. Let's you know, it's not I'm not the freak anymore. Yeah, get your budgets on.
You know, we're all doing it.
I think it's interesting that, that you and I in this podcast, you've got this sort of the hard core budget in yourself and then me who's just like just sort of going along with it. So I feel like we're sort of the angel and devil of, of budgeting. We're like, and I'm sure one day I'll sit down, I'll be like, Alright, I'll get some, I'll do it, just does and get some highlighters that actually planner. But like for now I'm just vibe and it works, I think.
I reckon there's a lot of people that including you, that when you roll off your low fixed interest rate home loan you're suddenly going to go say what now? How do I find an extra 1500 dollars a month or whatever? It's going to be done.
But I'm just I'm just pretending that's not going to happen. I've got to take another year. So I'm like that. That's fine. It's good.
I'm just looking forward to the vote when you come to be and just show me how to budget, show.
Me how to show me which highlighters you use. And just lastly, as always, we've got just this budget tip of the week, which is food related, I believe.
Yes. Quick tip. And this is when people are adjusting for their household spending, we're seeing that food is a big thing that people are really trying to, you know, not eat out as much and, you know, trying to save on food costs. So this is my tip is to know the difference between use by and best before dates on your food, the one that you really you know, you should check it out if it's past is the use by date so donate food that is past the use by date that is set by you know you
know the Food Standards Australia. And you really should do that if it's just best before May. That's just a suggestion. Yeah. Like this would be better if you had eaten it before this date, but it doesn't mean you can't have it afterwards. So I just think all.
Systems are scam. The whole thing, the whole this before thing scam, it's always wrong.
Well, that's the incentive is they want you to be checking it out and buying new ones. But no best best before just give a little sniff if it smells. All right, you could eat it well.
Thanks, everyone, for joining us again. Hopefully you've got some good tips there on both them. Best before dates and, you know, rent renting. But yeah, it's been a pleasure.
Yep. Know your rights when it comes to your tenancy and, you know, get the help that you need if you are facing one of those massive increases. Thanks, Tom.
Thanks, Jess. See you next week.
This episode of It All Adds Up was produced by Chee Wong. The information discussed is general in nature and does not take into account your personal financial situation, goals or objectives. You should always do your own research or get professional advice before making any major financial decisions. If you like today's episode, hit follow in your podcast app. Leave a review and recommend it to all your friends. You can submit your listener questions in text or audio
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