Australia’s rental market can’t avoid an overhaul any longer.
It’s almost impossible to find evidence that suggests anything other than a huge influx of properties coming onto the market. In the past 12 months, 362,708 houses and 287,233 units were advertised for rent across the country – the most on record for a 12-month period:
In the same time, advertisements grew by around 9%.
At an economic level, that level of vacancies makes sense. Investor activity has never been higher, despite regulator activity to curb it. Australians are buying more houses at higher prices than ever before.
As property prices continue to boom, landlords use that extra leverage to reinvest in another property.
From less than 10% of all investors five years earlier, around 16% of investors nationally now own multiple properties. On the east coast, it’s pushing 18%.
Rental yields are at record lows. There are signs more Australian mortgages are starting to fall into arrears.
What doesn’t make sense is landlord – and rental agent – behaviour.
At a time when it feels like it’s crucial to lock down a reliable long-term tenant, Australians have never felt so uncomfortable leasing a home.
Last month, Choice released a report, “Unsettled: life in Australia’s private rental market”. From the 1005 renters surveyed, a picture emerged of a disconcertingly large percentage of tenants who felt insecure in their current agreement, had experienced some form of discrimination in their search for a home, or were afraid to assert their rights, fearing a backlash from landlords and agents.
Reserve Bank of Australia Luci Ellis even noted it in a speech last month, themed “Housing and inequality”. More and more renters were on the move, she said, and given how disruptive and costly that can be, Ellis questioned “whether all those moves by renters were desired by those households”.
For decades, the model for renting a house in Australia has barely, if at all, changed. Find a property, inspect the property, fill out the application, hope your references hold up, sit at home by the phone suspecting everyone else is sneakily making a higher offer.
Think about some depressing options for your loyal, beloved canine companion (or kids). Think about how much you hate applying for a rental property.
But really, you should take a second to congratulate yourself. You’ve just identified an industry that’s ripe for disruption.
Complacency, consumer frustration, monopoly, tradition, arrogance. Find a company with a “take it or leave it” attitude right now and you’re almost guaranteed a growing list of weary customers waiting in the wings for you to give them something better.
Uber knew it, and the one disruptor causing real estate agents the most headaches, Airbnb, knows it, and won’t let go.
Airbnb has already caused havoc in the short-term stay market for traditional accommodation operators. There’s evidence to suggest it’s also at least partly responsible for keeping rents and property prices high in super-hot cities.
Now, according to Bloomberg, Airbnb has hired consulting firm McKinsey and Co to investigate moving in to the long-term rental market.
Industry leaders in Australia don’t seem too fazed, adopting a “Let’s see them try” stance.
Greg Bader saw all the same signs of complacency in Australia’s big telcos when he started out as iiNet’s chief technology officer in 2003. By the time he’d left in 2015, Australians looking for an ISP were enjoying the benefits of what true “disruption” can bring to a marketplace.
And because around the time he left iiNet he also had daughters leaving uni and trying to find a place of their own, he also learnt how little the rental marketplace had changed with the times.
As Rent.com.au’s CEO, Bader has been helping it nibble away at the edges of the rental listings market for a couple of years now. It’s a mammoth task, to make a dent in market share of the big two players, Domain and REA, the owner of realestate.com.au.
“Renting’s a tough gig, the whole our society changed so much in the last 10 years; I just don’t think this part of the industry has kept up with the change,” he says.
“We’ve got 30% of our population renting now and the process at the moment is tough. It is intimidating and scary for a young person, it’s demeaning and we thought there was some stuff we could do there.”
But there are some things small players can do that make a big difference, and Bader is enjoying the game right now.
This week, Rent.com.au added another one of those small things to its listings – an NBN status:
Bader says he doesn’t expect anyone to “actually select a property purely based on the available broadband options”, but having the NBN status front and centre is all part of a larger mission to help renters make a more informed decision.
The NBN status can also be expanded to show what type of connection the home has, or if it has no connection, when NBN will become available.
It’s not all about the renters though. Rent.com.au currently hosts around 70,000 listings nationwide – for free. Landlords and agents only pay for the listing if it results in a tenancy.
It’s another unique feature Bader’s team has been quietly building up to for a while. For the first time in Australia, landlords and agents can track each property from listing to a signed lease.
And what it means is that landlords and agents will only have to pay for listings that work for them, rather than simply trusting that the exposure of the listing helped.
That’s quite a shake-up.
“We’re unashamedly pro-renter, we want to make life easier for the renter,” Bader says, “but there’s things we can do using tech, using information to make life easier for everyone in the process.”
“If they sell a car on Gumtree or a house on REA, the seller gets charged a fee and they’ve got no idea of the performance of that ad. You can tell you how many eyeballs were on it, but it’s a very broad measure.”
Bader admits there’s definitely an element of goodwill in the strategy, but he says it’s about “closing the loop” between everyone involved.
“We’re encouraging a renter to rent through us and we’ve got all sorts of automated tools to make that a better experience, and once they’ve selected it they come back and tell us they’ve got the property. We contact the agent and the loop’s closed.”
Everyone, as they say in the classics, kicks a goal.
A brief history of disruption
Bader was on board at iiNet as CTO and chief business officer for 13 years from 2002. As a company that grew from a Perth garage to Australia’s second-biggest internet service provider, there were plenty of lessons for Bader in how to take on a service monopoly and survive.
“The best lesson I learnt from Michael (Malone, founder) was simply that if you do the right thing by your customers you get rewarded,” Bader says.
“We worked bloody hard at our customer service and we had a saying that customer service is not a department, it’s a way of life.
“Our single biggest motivator was that we knew we were doing good, and we know here we will one day look back and know we made the industry better for people.
“That was the single biggest driver at iiNet, and I believe that broadband is better in Australia because of what we did.”
iiNet was the first ISP to get rid of the loathed excess data charges, and the first to roll out ADSL 2+, which in turn forced Telstra’s hand to follow suit.
Bader admits such innovations were commercial and for business reasons, but ultimately had great benefits for consumers.
“When you’re small and nimble you can change things pretty quickly,” he says.
Selling real estate in any form is a different proposition to a data plan though, and Bader says Rent.com.au was never going to grow by simply “mMe coming in and asking them to pay X dollars a month just to list”.
“The challenge for a new guy coming in is you have to demonstrate incremental value to them. That’s why we couldn’t go in with a subscription model. We had to restructure our plan so there’s no risk and we’re now starting to get some real traction.”
The little things
The addition of a Pet Resume has been a clear winner. Bader says around 25% of landlords are happy to say they will take pets and 25% won’t, but the other 50% won’t specify either way.
If you’ve got a pet, and can’t be bothered going through the application process just to find out your animal isn’t welcome, that means you’re cutting out half of your options.
“So the owners of those 50% are probably open to pets but maybe just want more information,” Bader says.
“An indoor cat that is vaccinated is a lot different to four pit bulls. We had a lady fill out a Pet Resume for one listing and it turned out she had a goldfish.”
But the Pet Resume is part of the larger Renter Resume property hunters are asked to fill out. There’s an option to have a full application on Rent.com.au’s database which allows a potential tenant to make an offer on a listing as they’re walking through an inspection, with a single click.
A Walk Score and Transit Score is all about Rent.com.au’s mission to provide “richer, more relevant information”.
“There’s a lot of people moving into the big cities who aren’t familiar with the area,” Bader says. “If you’ve completed your Renter Resume, we also know where you work, so if you click on a property we can also calculate your commute for you.
Rent.com.au has pulled on board suppliers and tradies from all over the country to make sure the lights are on in your new home when you move in. And turned off in your old home after you leave.
Closing the loop
It’s important to note that all these tools do not deliberately have a power-to-the-renter focus. There are plenty of benefits here for landlords too.
Reference checks are verified and at your fingertips. Adding options like NBN, Walk Score and Pet Resume make a listing far more attractive.
As well as finding a good tenant, Rent.com.au can use the same approach to find a good property manager.
Bader says it’s probably inevitable that the market will catch up with Rent.com.au. It wouldn’t be a proper shake-up if it didn’t.
“We’re going to look back on this and say how the hell wasn’t it like this all the time?” he says.
But he doesn’t think that will happen overnight.
“Personally I don’t think we’re on the radar and I’d be surprised if (the big players) even know who we are.”
“They’ve got their own strategy, they’re very focused on the sales side. Renters for them are just something they need to do, whereas for us it’s everything we do.”
* Disclosure. Allure Media, publisher of Business Insider Australia, is 100% owned by Fairfax Media, publisher of Domain.
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