Will rent reforms spark landlord exodus in NSW?

A shakeup of tenancy laws in NSW that strengthens renters’ rights could result in an exodus of landlords.

That’s the worry for Real Estate Institute of NSW board member Jo Natoli, who fears the reforms will lead to thousands of properties being taken off the rental market.

And that is likely to drive demand and rents higher, the property management agency founder told Australian Conveyancer.

The new rules include a ban on so-called “no grounds” evictions, rent increases being limited to once per year, and tenants needing to be given a specific reason for not having pets.

NSW Fair Trading has started collecting details about reasons a tenancy has ended, with the landlord obliged to provide this reason when releasing a rental bond.

Rental Specialists founder Natoli thinks thousands of investment properties will exit the market.

“If you have a look at Victoria for example, when they had their legislative changes go through, they lost around 24,000 properties off the rental market, which put even more strain on the rental market,” Natoli said.

“We are expecting something similar to take place here in NSW. In Victoria most of the properties that came off were sold.”

Investing in property as a landlord is becoming less attractive given diminishing rights of owners, according to Natoli.

“When you have a look at some of the changes to the legislation that relate to terminations for example, it’s very difficult to recover possession of your property unless you have a particular circumstance,” she said.

“We had the ability to terminate a contract because the contract was coming to its expiry date. Now we have a situation in NSW where a contract does not have an expiry date.

“The fixed term lease has a start date and an end date but when the end date comes around, I can’t ask the tenant to leave unless certain other circumstances arise in my life.”

The Real Estate Institute NSW – the peak body for the state’s real estate agents – said the changes would worsen the situation for renters, especially in Sydney. The peak body says the vacancy rate hit just 1.6 per cent in April, down from 2 per cent in March.

Data shows the number of new loans to investors in NSW fell by more than 2,500 in the March quarter.

Natoli said given more property transactions were likely as investors sold properties, the state’s conveyancers could “be the beneficiaries of a more buoyant sales market”.

“That’d be good for them,” she said of the laws’ impact on conveyancers, while saying that they pushed investors away from investing in residential property and towards commercial.

“I can go an invest in commercial tomorrow and have none of these issues.”

Marcus Denning, principal of law firm Denning Legal, which specialises in property and construction law, echoed Natoli’s comments.

He said that some landlords were review their long-term rental strategies in the wake of the tenancy law reforms.

According to the lawyer, some clients were already deciding to sell or rent out their homes using Airbnb, hoping to escape the extra regulations. 

“The outcomes of these decisions may reduce the number of available rentals and cause prices to increase for tenants who are already struggling,” he said.

“If the responsibilities of landlords rise under new laws, people may invest their funds differently.”

A spokesperson for NSW Fair Trading said: “Data from NSW Fair Trading indicates there has been no significant impact to the investor market following the October 2024 amendments to the Residential Tenancies Act. 

“Fair Trading will continue to closely monitor the market with a focus on investor participation and rental supply.

“The NSW Government remains committed to a balanced approach by providing fair protections for renters while maintaining a stable and viable environment for property investment.”