Two big factors impacting landlords

24 Mar 2021

By Prue Bryant

The oversupply of rental properties and incoming changes to tenancy laws are the biggest issues impacting you as a landlord in the current market.

There is an oversupply of homes for rent in Melbourne, especially in the inner city in suburbs such as Ascot Vale, Coburg, Brunswick and Essendon due to fewer prospective tenants. This is because of the effects of the pandemic including rising unemployment, a fall in the number of international students and the dramatic drop in Australia’s immigration rate.

Head of research at respected property data firm Tim Lawless said: “Melbourne has seen its rental market weaken via higher rental supply due to a recent history of  investor exuberance, weaker demand from negative interstate migration and, more recently, a demand shock from closed international borders where Melbourne and Sydney were the primary recipients of migrant arrivals.”

Over the past year, rents are eight per cent lower in Melbourne, according to CoreLogic.

There are a significant number of similar properties advertised, competing for a smaller than normal pool of potential tenants. In such a competitive market it is important that you as a landlord are realistic about your rental demands. You might need to reduce your weekly rent, perhaps only by $10 or so, in order to attract the right tenant. Every week your property is on the market at a higher rent, you’re losing money. It’s far better to have someone in there than to have it vacant unnecessarily.

Extended tenancy terms

In order to attract tenants, it’s not necessary to offer extended tenancy terms. Our recommended and typical rental period is 12 months and that is what we continue to suggest. Your circumstances as a landlord may change significantly over terms longer than 12 months and committing to extended agreements can limit your options.

Mr Lawless points out: “Until international borders reopen and migration rates return to their pre-COVID levels, a substantial improvement in inner-city apartment rents is unlikely.”

This doesn’t mean it is all negative and as discussed prior it is anticipated the market will pick up in the medium term. However in the current market, as a landlord you might need to take a reduced rent for a period of time and then reassess at the end of the leasing period.

New  Victorian tenancy laws

The new Victorian tenancy laws, which were postponed due to COVID, come into effect at the end of March. These have been introduced to protect tenants and property. It’s important as a landlord that you meet the new obligations of the minimum standards introduced. This will include yearly and/or bi-yearly compliancy checks for fire alarms, gas and electrical. Some properties might need to get up to standard. If you are without a tenant, it is the perfect time to do that.

Key points of the new legislation include compulsory locks on doors and windows, heating, window coverings and the requirement that a property is adequately ventilated and free from mould and damp.

Brad Teal’s compliance subscription plan, which starts from $325 a year, ensures your property will be compliant with all relevant legislation.

If you have any questions or require help updating your property and ensuring it is compliant, please reach out to the Brad Teal team.


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