Terminating a fixed-term lease can be a costly decision but, whatever your reasons for doing so, experts say the No.1 rule is to give plenty of notice of your intention to vacate.
The first step is to put in writing your plans to break your lease as soon as possible to help minimise disruption between the old and new tenant, according to Stone Real Estate ACT property management director Amanda Tehle.
“Gone are the days when you had to try to find someone to take your place,” she said. “It’s still important for agents out there to try to find the best possible tenant for their owners, too. That’s what we are here for.”
In almost every Australian state other than NSW, the typical penalty for tenants breaking a lease is to reimburse their landlord for any expenses incurred as a result of the break lease, including any loss of rent, Raine and Horne property management national manager Maria Milillo said.
“It’s pretty much that way in every state apart from NSW,” she said. “They’re the only state where the determination of the amount of money you pay is fixed. So if you have, for example, 75 per cent of your lease still pending then you must pay four weeks rent.”
However, Ms Milillo said her advice would always be that a tenant checks their lease agreement, as well as the governing body websites for information, because the length and terms of leases in some states could vary.
Readvertising the property for rent is a common cost for tenants choosing to vacate early, as well as a letting fee, which could be between one to two weeks’ rent.
“For anyone facing financial hardship, they should make sure they’ve researched and are completely aware of all the support that’s available first before they go down this road because it could be quite costly,” Ms Milillo said.
“Depending on the financial position of the landlord, some are able to be fairly generous and really support tenants but not every landlord is in that position, as they too could be affected financially. So, that’s why communication is really key.”
Belle Property head of property management and escapes Melinda Cotton said tenants considering breaking their lease should carefully consider their decision.
“It’s not always wise to go to a higher rental property,” she said. “Tenants think, ‘Yes, I can afford to do it’, but don’t take into account if something were to happen.”
“Be careful about your reasons for moving into a property and give yourself a little wiggle room, financially.”
State by state guide to breaking a lease
ACT Tenants in the first half of a tenancy agreement will incur a maximum fee of six weeks’ rent, and if the agreement is in the second half, it’s a maximum of four weeks’ rent.
“The penalty, though, can be shortened if we find a tenant in, say, week three of that six-week period. You would only pay up to the day prior to the new tenant starting,” said Ms Tehle.
If a new tenant moves in during that period, landlords may charge administrative costs, such as advertising fees, from the vacating tenant up to a maximum of one week’s rent.
In certain circumstances, such as financial hardship, where a court has made a protection order, where a tenant has accepted a social housing or aged-care place, or where a tenant has been posted away from Canberra for work, tenants may terminate leases without paying compensation.
Minimum notice periods depend on the reason for terminating the fixed agreement.
Western Australia Tenants who terminate a fixed lease early may have to pay rent or other reasonable costs (such as advertising) incurred by the landlord until a new tenant is found or the original tenancy period expires.
Tenants affected by family violence may terminate a tenancy agreement with seven days’ notice.
Fixed leases can also be ended by mutual agreement without penalty or the need to issue notices. Both the landlord and tenant need to agree, in writing, that the tenancy agreement should end on a specified date, and both parties must sign a clear, written statement to this effect.
Tasmania Tenants may end a lease by giving the landlord or agent 14 days’ notice if the owner has not done something the lease says they must do, has done something the lease says they must not do, or has not done repairs within the required timeframe.
If a tenant breaks a lease before the end date without proper reasons or a notice to terminate, they are responsible for paying rent until a new lease starts or until the end date of the lease, whichever happens first.
The owner must make reasonable attempts to try to find a new tenant, and the tenant will have to pay any advertising costs charged to the owner.
Northern Territory Tenants who break a fixed-term lease will be liable to pay the loss of rent for the remainder of the lease or until the property is re-let, and may also have to pay fees such as advertising costs to the real estate agent.
Tenants should give landlords or agents as much notice as possible to arrange a new tenant before their departure date.
South Australia Tenants who break a fixed-term lease are responsible for costs related to re-letting the property.
Landlords can claim loss of rent until the property is re-let, as well as advertising and re-letting fees charged to the landlord by an agent.
Formulas developed by the South Australian Civil and Administrative Tribunal (SACAT) must be applied to all advertising and re-letting costs. If the tenant breaks the lease in the first quarter of their lease term, full costs can be claimed.
If landlords need to reduce rent to re-let the property quickly, they can claim the difference from the tenant until the date their lease ends. If the property is re-let at a higher rent, the landlord is profiting from the lease break, and tenants can expect the profit to be offset against the landlord’s loss of rent, advertising and re-letting fee.
Queensland Tenants who break a fixed-term lease may need to compensate the owner or property manager for costs incurred. These include rent until a new tenant is found or until the end date of the agreement, as well as reasonable re-letting costs (usually one week’s rent plus GST) and advertising costs. Owners and property managers must mitigate any losses.
Tenants experiencing excessive hardship may make an urgent application to QCAT for an order terminating the agreement, however, QCAT may still order compensation to be paid.
Article Source: www.brisbanetimes.com.au
Why rising interest rates are good news for property investors
Cashed-up property investors are set to be the biggest winners from the first in what’s likely to be a series of hikes in the Reserve Bank of Australia’s official cash rate.
The rise from the historic low of 0.1 per cent to 0.35 per cent, together with the forecast of more to come, sparked immediate fear and loathing from those whose finances were already strained by record-high home prices.
“I think we will now see a reduction in buyer demand in the market as a result of some of the scaremongering that’s gone on about this rise,” says Nicola McDougall, the chair of the Property Investment Professionals of Australia.
“As a result, the more experienced investors and more savvy home buyers will welcome less competition in the market.
“At the same time, they tend to have the discretionary income and cash flows because they’re high-income earners, so they’re the least likely to be affected by these minor increases in the interest rate.
“They will probably have a more sophisticated understanding of monetary policy and financial markets too, and will welcome a return to more sustainable conditions.”
While the RBA tends to cut rates very quickly when the economy slumps, such as after the GFC and during the COVID pandemic, it tends to lift rates extremely slowly, she points out.
The last time it increased the cash rate because of inflationary concerns was during the two years from March 2006 to March 2008, when the rate rose only two percentage points over the whole period.
Australian Bureau of Statistics figures show this recent 0.25 per cent rate rise will increase interest rate charges on an average mortgage of $600,000 by an additional $1500 a year.
Borrowers have enjoyed rate cuts of 1.9 per cent over the last six years, says Godfrey Dinh, chief executive of fintech Futurerent, so they shouldn’t be concerned about such a minor lift, particularly as they’ve already been assessed at much higher interest rates.
“Prestige property investors are likely to have most of their portfolios in Sydney and Melbourne anyway, so have benefitted from phenomenal levels of capital growth,” says Dinh, whose company gives property investors up to $100,000 of rent in advance.
“Against those, this interest rate is not significant.
“Most have bought in the cycle and have had a dream run with price growth and rental growth, and they’d typically have a lot of contingencies built in.
“They’ll have good incomes and are happy to run negatively geared property and have no problem covering a cash flow shortfall.”
But it will squeeze everyone’s hip pocket, believes Loan Market director and mortgage broker Alex Lambros.
And if investors are buying more expensive homes, it will hit them harder.
“A 0.25 per cent interest rate rise on a $10 million property will be a significant jump,” he says.
“The wealthier might have different buffers in place – more cash or more assets they can sell to raise cash – but they’ll feel it just the same.
Article source: www.domain.com.au
How To Find The Top New Property Listings
It can be difficult to find the top new property listings when there are so many offers on the market. However, by taking a few simple steps, you can make the process much easier. First, you need to define your market and consider different forms of marketing. Then, connect with other agents in your area and search niche blogs and other local publications for real estate solutions. Finally, ask for referrals from your current connections and use all of the information you’ve gathered to find the best new property listings for your business.
Define your market
When you’re looking for new property listings, it’s important to have a clear idea of the type of property you’re interested in. You need to know your target market inside and out so that you can focus your search on the right places. Consider what type of properties are in demand in your area and what price range you’re looking for.
Once you have a good understanding of your market, you can start to narrow down your search. As seen with off-market properties, some of the best listings are not always advertised publicly. They may be sold through word-of-mouth or by networking with other agents in your area.
Consider different forms of marketing
There are many different ways to market your business, and each one has its advantages and disadvantages. Traditional marketing methods such as print ads, radio commercials,
and TV commercials can be expensive and time-consuming. However, they can reach a wide audience and generate leads quickly. Social media marketing is another option that is often used by real estate agents. It’s a great way to connect with potential clients and build relationships. However, it can be difficult to stand out from the crowd on social media.
Connect with other agents in your area
One of the best ways to find new property listings is to connect with other agents in your area. They may be willing to share their listing inventory with you or refer you to their clients. You can also search for real estate agents on social media and connect with them that way. By building relationships with other agents, you’ll be able to get access to the best listings before they’re advertised publicly.
Search niche blogs and other local publications for real estate solutions
Another great way to find new property listings is to search niche blogs and other local publications for real estate solutions. These publications often have classified ads that list properties for sale. You can also find contact information for real estate agents in these publications. By searching through these resources, you’ll be able to find listings that are not advertised anywhere else.
Ask for referrals
If you’re having trouble finding new property listings, ask for referrals from your current clients. They may know someone who is looking to sell their property or they may have seen a listing that isn’t advertised yet. Referrals can be a great way to get access to new listings before they hit the market.
Use your current connections
Finally, don’t forget to use your current connections when you’re searching for new property listings. Your family, friends, and colleagues may know someone who is looking to sell their property. They may also be able to give you referrals to other agents in your area. By using all of your connections, you’ll be able to find the best new listings for your business.
Finding the top new property listings can be a challenge. Use all of the resources at your disposal to get ahead of the competition and grow your business. Thanks for reading!
House prices to plummet as huge interest rate increase expected
A major bank has warned house prices will plummet this year as faster rate hikes have a chilling impact on the property market, amid fears that interest rates could rise by a whopping 0.4 per cent next month.
Earlier this year, ANZ had predicted that house prices would rise by 8 per cent on average in capital cites across Australia, but it has now slashed the forecast to house values dropping by 3 per cent in 2022 on the back of unexpected rate rises for the rest of the year.
The major bank has also forecast that house prices will plunge by a further 8 per cent next year, an even bigger drop than its earlier forecast for 2023.
The country’s third biggest home lender said the Reserve Bank of Australia’s move to raise rates far earlier than expected would have a sobering effect on the property market as buyers are limited by the amount they can borrow.
ANZ senior economists Felicity Emmett and Adelaide Timbrell have said interest rates will hit 2.35 per cent by the middle of 2023, although other experts have tipped them to reach as high as 3.25 per cent by that year.
“Housing prices look set to turn lower in coming months,” the economists wrote.
“While fixed rates have already risen sharply, the steep increases in the cash rate will flow through to variable mortgage rates, lifting minimum repayments significantly and reducing borrowing power. Macroprudential tightening, solid supply and constrained affordability will also be headwinds for house prices.”
ANZ’s economists added that official interest rates of 2.35 per cent would see a variable mortgage rate soar to 4.75 per cent, which would “significantly” reduce how much people could borrow.
House prices have already began to drop in some capitals. In Sydney, prices decreased for the first time since early in the pandemic by 0.1 per cent in April and in Hobart the drop was more marked at 0.44 per cent, the first time prices have fallen since early 2018.
ANZ predicted Sydney house prices would drop the most dramatically in the coming months with a fall of 8 per cent this year as a greater supply of homes hit the market and lenders further tighten their lending standards.
Interest rate rises would also trigger a drop of 8 per cent in Sydney house prices in 2023, their economists said.
For Melbourne, prices were expected to decrease by 5 per cent this year and 6 per cent in 2023, although Brisbane, Adelaide and Perth would buck the trend and still see house prices go up this year.
But 2023 was a different story with house prices predicted to drop by 9 per cent in Brisbane, 13 per cent in Adelaide and 7 per cent in Perth, according to ANZ economists.
Despite the RBA expressing concerns about the impact of higher interest rates on Australians who are highly indebted when it comes to property, according to the minutes published from its May 3 meeting, it still caught experts off guard when it hiked rates by 0.25 per cent.
However, homeowners narrowly avoided an even bigger jump and there’s a risk this super-sized move could be made by the RBA in June, experts have warned.
The RBA minutes showed it was weighing up a rate rise of either 0.15 per cent, 0.25 per cent or 0.4 per cent.
“Members agreed that raising the cash rate by 15 basis points was not the preferred option given that policy was very stimulatory and that it was highly probable that further rate rises would be required,” the minutes said.
“A 15-basis-point increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25 basis points.
“An argument for an increase of 40 basis points could be made given the upside risks to inflation and the current very low level of interest rates.
“However, members agreed that the preferred option was 25 basis points. A move of this size would help signal that the board was now returning to normal operating procedures after the extraordinary period of the pandemic.”
Economists are predicting that a 0.4 per cent rate rise could seriously be in play for June.
Commonwealth Bank’s Belinda Allen argued it can’t be “ruled out” and will hinge on data from the Wage Price Index.
Westpac’s chief economist Bill Evans said a 0.4 per cent increase in June could be seen as “best policy” considering labour shortages, rising labour costs and inflation challenges.
He added there was no “real argument” against the 0.4 per cent rise next month, “although the RBA said that because it meets monthly it would have the opportunity to review the setting of interest rates again within a relatively short period of time”.
The RBA’s reference to other central banks around the world moving to raise interest rates could be another telling sign that the bigger rate hike is on the cards.
“Several central banks in advanced economies had indicated that they were seeking to return policy rates to a neutral setting quickly and may increase policy rates further thereafter,” the minutes said.
The RBA also revealed that its economists assumed interest rates will hit 1.75 per cent by the end of the year and 2.5 per cent by the end of 2023.
All of Australia’s banking juggernauts responded to this month’s historic rate rise within hours and passed on the hike.
It’s a challenge that the RBA is well aware of too.
“Housing prices in Australia could also be more sensitive to rising interest rates than assumed, which would be likely to result in lower household wealth and consumption,” the minutes read.
Article source: www.news.com.au
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