Perth Real Estate News Feed

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Our state is in a rental crisis! So why are there so many break leases occurring?

The current state of our WA rental market is unprecedented. I do not love using the term ‘unprecedented’ as it is a word being coined by many these days to invoke an emotional reaction from the reader. It is certainly a word that grew in popularity throughout 2019 - 2022 as we worked our way through the complexities of the Covid-19 pandemic. It is a term that is however fitting in the case of our WA rental market. When you hear about families having to sleep in their cars, or tents or to brave abusive family environments just to have a roof over their heads the use of an emotive word like ‘unprecedented’ is a minor literary sin that I am happy to make. I am glad that the real effects of this rental shortage are being highlighted in recent online posts and in our media. Kim McDonald of The West Australian’s article on Saturday 15th October, 2022, brought this grim reality to the surface for us all to read and consider (thank you very much Kim for reporting this). Link: Article, The West

As an active property management agency in the Perth inner city we have come across our share of tear jerking stories and genuine tales of hardship in 2022. We try as much as we can to help but there are only so many apartments, townhouses, homes and shared living rooms that we can place our applicants in to. So if there is a rental crisis, and we agree that there is, why are there so many break leases occurring at the moment? 

Our agency is liaising with a higher than usual number of tenants that are choosing to break their fixed term lease in 2022. For all accounts this is a trend that is being experienced by many agencies within our Reiwa network. Breaking lease and going where, you might ask? This is a great question, one which my team and I have been asking in recent weeks. 

The reasons are many and the layers behind the decisions vary. For many it is purely monetary, for a few it is the personal preference for a lifestyle change, while for some the reasons are geo-political. Delving a little deeper in to this, the following are actual situations that we have come across in recent weeks:

  • A tenant’s need to reduce their weekly rental spend to combat rising costs. For example, breaking lease on their $450 per week one bedroom fully furnished apartment to join a friend in a partly furnished two bedroom apartment asking only $550 per week. The nett effect is a $175 saving each week for this tenant.
  • Moving back in with mum and dad to save the deposit needed to qualify for a Keystart loan application. With the weekly rental prices rising many young professionals are opting to return to the family home in order to reallocate their weekly rental commitment from their expense column in to their savings column in their personal balance sheet. Thank you mum and dad for opening up your doors.
  • Shifting interstate or internationally to pursue a new role, a study option or a postponed life adventure. With travel borders now freely open (well almost), those who have held back their move away from WA to further their career, their studies or their life experiences are now packing their bags, breaking their lease and hopping on an expensive flight.
  • Wanting to try different ways of living. The rise of shared and co-living in Perth is a trend that we are loving and have had great experience with. World class shared living opportunities like The Switch in Perth City (Website: Switch Living Perth), has many renters considering the jump from the traditional long term residential rental structure to the excitement of joining a group of like-minded and progressive renters in a full-service shared living community. Trendy, social and a truly accommodating way of living!
  • Geo-political factors driving some tenants to return home to help loved ones. With international crisis in all continents many members of the family of working age are being compelled to return home to support their families.
  • Choosing to become a home owner and wanting to do it NOW. With increasing rental prices we have reached the inevitable tipping point between 'rent vs buy' for many. Tenants are wishing to buy rather than continue to rent and they are wanting to do it right away. They have seen a property that they love and are wanting to lock in a fixed interest mortgage now before the mortgage rates go up further.

Breaking a lease does not come cheap, nor easy, so the decision being made by the tenant is 9 times out of 10 a genuine need and it has been well considered. There are significant costs that the tenant has to cover to mitigate the lessor’s loss. This can include pro-rata reimbursement of the unexpired portion of the letting fee paid to the Agent, the advertising costs to find a new tenant as well as the weekly rent until a new tenant begins their lease (not to mention any shortfall in the weekly rent achieved, however in this market the rent is likely to have gone up for the property). The lessor has a requirement to mitigate the tenant’s loss as well. As the Agent we have a challenging role when managing this process to ensure that we meet the obligations of the Residential Tenancies Act while maintaining a harmonious balance between the tenant’s needs and the lessor’s wants.

One thing that a break lease can achieve in a tight rental market is that it provides another available property to help accommodate the pent up rental demand. It is not all bad news, despite what the name ‘break lease’ may insinuate. In many circumstances the tenant is moving on to a new and positive chapter, the lessor is being reimbursed a significant portion of their costs for assisting the vacating tenant, and a new keen applicant has the opportunity to call the property their new home. I would actually consider it to be a win-win scenario a lot of the time.

Brendon Habak - Selling Principal