AHURI BRIEF

Do long-term residential leases result in long-term tenancies?

One quarter of all rental investors sell within one year of acquiring a rental property

Last updated 14 Sep 2017

The recent decision by the Victorian State Government to allow the maximum length of residential tenancy agreements to be longer than 5 years raises the question; when it comes to the length of rental leases, how do Australia’s States and Territories compare, and what impact does extending the maximum length have on the take up of longer-term leases?

All other Australian states and territories allow for much longer durations in standard residential tenancy agreements covered by their Residential Tenancy Acts than Victoria or have no maximum fixed-term rental period. However, just because longer leases are available, are tenants and landlords signing longer leases? When we look at the data available from across Australia we see that the average duration of a rental bond in 2015–16 was 2 years and 2.5 months in Victoria, between 1 and 2 years in NSW and around a year and half in Queensland.

Figure 1: Comparison of Australian state and territories residential tenancy legislation and tenancy length

  Commencement
date of
tenancy legislation
Length of tenancy agreement
covered by the Act
Tenancy length by bond repayment in 2015–16
VIC 1997 Up to 5 years* Avg. tenancy of 806 days (2 years and 2.5 months)
NSW 2010 Standard tenancy agreement
available up to 98 years.  
Standard agreement can
be varied for leases longer
than 20 years.
65.6% of tenancies are 1–24 months in length
 
12% are 1-6 months
23.2% are 7-12 months
30.4% are 13-24 months
13.9% are 25-36 months
20.5% are 37+ months
QLD 2008 No time limit for fixed-term rental period Avg. tenancy for houses = 15.9 months
Avg. tenancy for units = 12.6 months
Avg. tenancy for rooming accom. = 6.6 months
ACT 1997 No time limit for fixed-term rental period No data available
TAS 1997 No time limit for fixed-term rental period No data available
SA 1995 No time limit for fixed-term rental period No data available
NT 2017 No time limit for fixed-term rental period No data available
WA 1987 No time limit for fixed-term rental period No data available

*Removal of 5 year maximum proposed in 2017 with Residential Tenancies Amendment (Long-term Tenancy Agreements) Bill 2017

Source for average tenancy duration: Victoria Residential Tenancies Bond Authority 2015–16 Annual Report; NSW Rental Bond Board 2015–16 annual report; Queensland Residential Tenancies Authority 2015–16 Annual report

Despite residential tenancy acts allowing for long tenancy options in some jurisdictions, it appears that, on average, most tenancies are relatively short term. Unfortunately, this data does not indicate whether this is because of tenant or landlord choice.

We must also remember that while the average duration of repaid rental bonds being longer than one year may imply landlords and tenants are signing up for leases of this length, it also may simply reflect that tenants are rolling over their shorter fixed term leases. Indeed, AHURI research from 2011 shows the vast majority (94%) of private renters with a fixed term rental agreement have a lease lasting 12 months or less. While a periodic lease may continue for a very long time period it doesn’t give a tenant the same security that having a binding long-term fixed lease does. This is particularly pertinent when we consider AHURI research showing one quarter of all rental investors sell within one year of buying or inheriting a rental property. Tenants in those cases may have to go through the time consuming process of looking for a new home all over again.