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MARKET UPDATE- OCTOBER 2023
As we look back at the month of October, Adelaide’s housing market continues its steady climb, reaching unprecedented heights.
August witnessed an increase of 1.1% in Adelaide’s housing values, pushing them to a new record high. Currently, the median house value in Adelaide is $682,642. Over the past five years, Adelaide’s home values have shown an impressive increase of 49%, marking the most substantial growth among all the capital cities.
A significant contributing factor to this growth is the limited supply of available properties, with listings dropping to nearly 42% below the previous five-year average for this time of the year.
Furthermore, Adelaide boasts the lowest rental vacancy rate of any capital city, standing at a mere 0.4%. These extremely tight rental conditions are likely encouraging more individuals to explore the option of homeownership, especially amidst this ongoing rental crisis.
REVIEW OF SA’S RENTING LAWS- PROVISIONS COMMENCING 1 SEPTEMBER 2023
More affordable rental bonds
Before 1 April 2023 landlords were able to claim residential bonds equivalent to a maximum 6-weeks’ rent when the weekly rent was more than $250, with only a 4-week bond entitled to be claimed for properties falling below that threshold. Increasingly fewer properties fell below this threshold.
Since April the bond threshold was raised to $800 to ensure that for the majority of rental properties in South Australia, only a 4-week bond is required.
This change reduces the amount of upfront costs for tenants by between $500 and $1,600, depending on the amount of rent they are paying.
The new amount applies to any bond paid or payable under an agreement entered into on or after 1 April 2023. Any bond paid before this date remains lodged with CBS until the conclusion of the tenancy agreement.
Rent bidding banned
Rent bidding has been banned in South Australia from 1 September 2023. Landlords or agents must advertise premises at a fixed amount and must not solicit or otherwise invite an offer for higher rent.
This means landlords are no longer able to advertise properties with a rent range, put properties up for rent auction, or solicit offers over the advertised rental price. This reform brings South Australia in line with other Australian jurisdictions which have introduced restrictions on rent bidding.
Additionally, where a third party is facilitating tenancy applications, any rating or assessment of a prospective tenant must not be based on an offer of higher rent.
A penalty of up to $20,000 now applies or $1,200 expiation fee.
Rental application form information requests
As a first step towards standardising rental application forms, landlords are being prohibited from requesting prescribed information from potential tenants.
Supporting regulations that define what information can’t be requested will come into operation soon following further consultation. Details on what will be prohibited and from when will be prescribed in the Regulations and updated here.
Breaches will incur a penalty of up to $20,000 or $1,200 expiation fee.
Protecting tenant information
For successful tenant applications, information provided for the purposes of applying to enter into a tenancy agreement will need to be destroyed within 3 years of the tenancy ending.
Prospective tenants’ information may only be kept for 30 days after the tenancy agreement is entered into (by the successful applicant) or up to 6 months with the prospective tenants’ consent. This will apply to landlords, agents or third parties facilitating tenancy applications.
Further a person holding tenant or prospective tenant personal information must take reasonable steps to protect the information from misuse, interference or loss and from unauthorised access, modification or disclosure.
These provisions commence on 1 September 2023. However, a 12 month transitional period has been applied from 1 September 2023 to comply with the requirements relating to destruction of personal information only.
A penalty of up to $20,000 has been set or $1,200 expiation fee.
Review of SA’s renting laws | Consumer and Business Services (cbs.sa.gov.au)
INTEREST RATES COULD RISE AGAIN ‘SHOULD INFLATION PROVE MORE PERSISTENT THAN EXPECTED’, RBA SUGGESTS
The prospect of another official interest rate increase will hinge on upcoming data on jobs and prices, with the Reserve Bank declaring it had “a low tolerance” should inflation not slow at the pace it has previously expected. Minutes from the RBA’s 3 October meeting, released on Tuesday, show the board weighed up the option of lifting the official cash rate by 25 basis points to 4.35% before deciding to leave the rate at 4.1% for a fourth straight month.
“There had not been sufficient new information over the preceding month from economic data or financial markets to necessitate” an increase, the minutes said.
However, by the next meeting, set for 7 November’s Melbourne Cup Day, the board would have fresh labour market and inflation figures, as well as its own revised quarterly forecasts.
“Some further tightening of policy may be required should inflation prove more persistent than expected,” the RBA said. Recent inflation numbers, including an uptick in the headline consumer price index in August to 5.2%, indicated that price increases may not decline as expected” the RBA said. Fuel prices, including a 30% increase in oil prices since the end of June, were also of concern.
The board noted “the rise in retail petrol prices would continue to underpin inflation over coming months and could influence households’ inflation expectations”. A separate ANZ’s survey of consumer sentiment, also released on Tuesday, showed inflation expectations increased 0.2 percentage points to 5.3% in the past week. Its four-week moving average increased to 5.3% from 5.2%.
Petrol prices have eased from September highs, although the decline may reverse in coming weeks as higher oil prices in the wake of Hamas’s attack on Israel take effect. Borrowers, particularly households, are hoping the RBA’s 400 basis points of rate rises since May 2022 is the peak. Investors are so far predicting the next RBA move – under new governor Michele Bullock – will be a cut, although their outlook could shift depending on how September figures for jobs, due Thursday, and inflation figures, due the following Wednesday, play out.
Initial market reaction on Tuesday was moderate with the Australian dollar nudging above 63.5 US cents and shares paring their gains for the day. Nab, which remains alone among Australia’s big four banks to predict a November rate rise, said the RBA’s comment of its “low tolerance” should inflation fail to slow as it predicted was a “hawkish” insertion compared with recent communications.
Next month’s meeting was “clearly live”, with the quarterly inflation numbers likely to exceed the RBA’s earlier expectations, Nab said. Economists such as Warren Hogan at Judo Bank have also forecast at least one more rate rise to come – possibly at next month’s meeting.
The recovery of home values in major cities has been one surprise compared with forecasts at the start of the year. Back then, prices had dropped on average by about 7% from their peaks with another 5% to 8% possible, Hogan said. Instead, there were up 4% to 5%, “a pretty big swing” compared with predictions.
“The rise in housing prices could also be a signal that the current policy stance was not as restrictive as has been assumed,” the RBA minutes stated, adding “although there was other evidence that monetary conditions were tight”. That evidence includes weak consumer spending as households coped with about 10% of their disposable income going to repay debt – a record high.
The pace of monthly increases in rents had been “broadly stable” but conditions remained “very tight”. That suggested rents would be “an ongoing source of inflationary pressure over the year ahead”, the RBA said. The board minutes noted the labour market had “reached a turning point” with the supply of new job seekers picking up and demand for workers moderating. Job vacancies had fallen from their peak last year “but remained high”.
“Members noted there were few signs of the risk of a price-wages spiral materialising” and household disposable income once inflation was taken into account was 3% lower than a year ago, the RBA said. The threat of “a material slowdown in the Chinese economy remained a key risk to the global outlook”, the bank said. Still, indicators had been more positive than in prior months, supporting prices for iron ore and coal – two of Australia’s biggest exports.
