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Real Estate Training Provider Claims Rental Prices Inflated by Unethical Business Practices

Updated: Oct 22

Real Estate Training Provider, Industry Training Consultants (ITC), claim that Australia's high rental prices have been caused by unethical business practises by real estate agents and poor regulation by NSW Fair Trade.

A 'For Rent' sign in front of an Australian home, with the text "Unethical Business Practices Raising Rents?" foregrounded

According to documents provided to the friendlyjordies team by ITC, the primary factors leading to the inflation in rental prices in Australia are:

People offering to pay more a week to secure the home they want to live in

For example, John has a $250pw property that can become a $500pw property only because someone out of town wants to pay more for it. ITC also reports that it has become increasingly common for prospective tenants looking for rental properties to offer above the asking price, sometimes offering to pre-pay several weeks, or even months of rent in advance.

Rental Prices of similar properties in the area

Because John's $250pw property is now $500pw, their neighbour Scott can rent his out for $500pw

Inflation in Rent due to size of the home

John's property was a 1 bedroom while Scott’s is 2 bedroom, so Scott can rent his out for $600pw (based only on what the agent thinks it could rent for)

Current pricing is not based on the condition of the property

John and Scott’s neighbour Sally went to the trouble of renovating her home to a modern setting before she rented it to anyone. However, Both John and Scott’s properties are and full of structural problems and 1960’s décor but can be rented out for the same price as Sally's based on the details listed above.


Rental Regulation Loopholes

Under the Residential Tenancies Act 2010 Section 33 Payment of rent by tenant;

(2) A landlord, or landlord’s agent, must not require a tenant to pay more than 2 weeks rent in advance under a residential tenancy agreement or to pay rent for a period of the tenancy before the end of the previous period for which rent has been paid. Note— A tenant may pay more than 2 weeks rent if the tenant wishes to do so.

According to ITC, agents have been taking advantage of this loophole (that of tenants opting to pay greater amounts in rent), and are inflating rental prices of older, defective homes, as the same rental price of new or renovated homes. This is apparently based purely on the ‘rental market’ of the area and not by the state of the property.


ITC also claim that NSW Fair Trading is lacking resources to audit Real Estate offices to ensure they comply with their legal responsibilities.


ITC claims these issues also flow on to the overall prices of Australian housing. According to Industry Training Consultants, some of the key drivers of housing inflation include:

  • Not valuing a home based on the condition of the property

  • Land use planning costs on residential development (owners going through the process of securing development or planning applications for future development, without any work having been done)

  • Flawed sale price methods

  • Unethical business practises

  • Government stimulus grants

  • Foreign investors

  • Loose government and central bank policies, that encourage speculative activity and excessive lending

Sources & Further Reading

https://legacy.legislation.nsw.gov.au/#/view/act/2010/42/part3/div2/sec33


https://www.friendlyjordies.com/post/australian-house-prices


https://www.itc.nsw.edu.au/


https://www.theguardian.com/australia-news/2022/oct/01/renting-to-the-highest-bidder-calls-for-federal-laws-to-ban-practice-amid-australias-cost-of-living-crisis


https://www.theguardian.com/australia-news/2022/sep/27/a-social-calamity-record-high-rents-push-tenants-to-breaking-point


https://www.abc.net.au/news/2022-06-29/census-finds-1-million-empty-houses-amid-affordability-crisis/101190794


https://www.abc.net.au/news/2014-11-04/janda-what-housing-supply-shortage/5865096


https://www.fairtrading.nsw.gov.au/housing-and-property/property-professionals/working-as-a-property-agent/rules-of-conduct

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