Could the no-grounds eviction ban deter property investors?

As reported by Broker Daily’s sister brand Real Estate Business, a ban on no-fault evictions was announced by Premier Chris Minns in an address to the 2024 NSW Labor Annual Conference. Both Labor and the Coalition had promised to end the practice during their 2023 election campaigns.

Currently, a landlord in NSW can terminate a lease at any time so long as they give the tenant 90 days’ notice. Meanwhile, for a fixed-term agreement of less than six months, landlords must give 30 days’ notice.

The new legislation, coming into effect in 2025, aims to ease some of the pressure felt by renters. Considering that a third of NSW is currently renting, this initiative will help many to rest easier.

“When I was young, the question used to be whether you would ever afford to buy a place in a city like Sydney. Now, many ask whether they can even afford to rent a place in a city like Sydney,” said Minns.

“Something has to change. We are losing twice as many young people as we are taking in, and the next generation feel locked out of the place where they were brought up. We’ve made this decision not just so that renters have a home, but to ensure they can build a life.”

Under the amendments, reasonable cause will need to be provided before an eviction can take place. This includes:

• Breaches of lease by the tenant, including property damage and failure to pay rent.
• Sale of the property.
• Significant repairs or renovations, with the caveat that home owners must not relist the property for sale within the next four weeks.
• Change of use.
• Owner intends to move into the property.
• Change of eligibility, e.g. if the renter is no longer eligible for an affordable housing program or is no longer a student.

Minns continued: “Bad tenants will still be able to be evicted. We don’t want home owners to have to put up with bad behaviour.”

“We believe this reform gets the balance right, but more importantly, this will give both home owners and renters more certainty, more peace of mind, so they can build a home and a life on surer ground.”

How will investors be impacted?

As discussed by CoreLogic’s head of research Australia, Eliza Owen, the changes could tip “the balance more in favour of tenants is that landlords could exit the market, and new investors may be dissuaded from purchasing property, thus reducing rental supply and pushing up rents”.

South Australia announced a ban on no-grounds evictions in July last year. Despite this, Owen highlighted that “new investment property finance has only trended higher and is up around 37 per cent as of May 2024”.

So, are these fears unfounded? ACT has similar no-grounds eviction laws, yet unlike South Australia which has seen a rise in investment since enacting the laws, the ACT has seen a dip.

“Rather than rents soaring in the absence of investor activity, rent values were up just 1.3 per cent between April 2023 and June this year [in the ACT],” said Owen.

Western Australia, similar to South Australia, has had no-grounds eviction laws in place since 2023. However, the state has seen a sharp rise in investor activity despite this, with the number of new investment loans secured for investment properties 53 per cent between May 2023 and May 2024. Meanwhile, the value of lending was up 74 per cent.

However, Western Australia also saw the highest increase in rent prices over the year, climbing 12.8 per cent.

All in all, Owen noted the ending of no-grounds evictions in unlikely to play a major role in reducing landlord gains: “Ending ‘no grounds’ evictions will support greater security of tenure for tenants. While this will come at the cost of flexibility, and potential rental income gains for landlords, reducing the power imbalance for tenants is unlikely to have a substantial impact on investor activity or rent values.”

“Prices in the rental market will continue to be dominated by demand factors such as population growth, household size and income, while the supply of investment property will be largely influenced by market conditions, such as capital growth prospects, availability of credit and interest rates.”

[Related: Housing supply likely to worsen before it improves: Economist]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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