Do Long Leases Result In Long-Term Tenancies?

Do Long Leases Result In Long-Term Tenancies?

Marco Afonso,

By law, leases in NSW can be up to 98 years, but does the length of a lease actually affect the length of the average tenancy? We take a look at the data.

Laws in NSW allow for extremely long leases, but does the possibility of a long-term tenancy affect how long renters actually choose to live in a property? Let’s take a look at Australian tenancy data to find out. 

What’s The Law On Tenancy Length In NSW?

If you’ve ever been a renter or owned an investment property, you probably know that leases in Australia typically run for a duration of six or 12 months. But what you might not know is that they can actually legally run up to 98 years in NSW. That might not be the most convenient option for a typical residential tenancy, but laws certainly allow for rental security. 

This maximum duration varies across the country, although most states and territories have no limit on lease maximums. Victoria, on the other hand, only recently changed legislation that allowed for a maximum of 5 years. 

These time periods refer to fixed-term leases, but there are other options for continuing a tenancy once a shorter lease is over. When the end of the lease is approaching, tenants often have the option to sign on for another fixed-term period, or to automatically roll over onto a periodic or month-by-month arrangement. As we’ve written about before, there are many benefits to committing to another fixed-term lease

So How Long Do NSW Renters Usually Stay In Tenancies For? 

12-month leases are by far the most common here in the Eastern Suburbs, a fact that’s backed up by 2017 research from CHOICE, National Shelter and the National Association of Tenant Organisations. They surveyed 1005 people and found that 51% had 1-year fixed-term leases, 20% were on rolling month-by-month agreements and 11% had fixed-term leases of six months or less. Only 6% had a fixed-term lease of 2 years and another 5% had a fixed-term of 5 years or more. 

The Australian Housing and Urban Research Institute found similar results when they looked into how long renters actually stay in these tenancies, including when lease renewals and fixed-terms leases switch to periodic. In the 2016-2017 financial year, 65.6% of tenancies in NSW were for 24 months or less. The most common amount of time was between one and two years, which accounted for 31% of tenancies, followed by 7-12 months for 22.1% of all tenancies. 

Interestingly, the research showed that many renters also stay on for longer times, with 21.2% of tenancies lasting 37 months or more. The story is no different in Victoria and Queensland, with the median lease durations hovering around the 1.5 year mark. 

Why Do People Move Between Properties? 

This data shows that leases and tenancies are relatively short-term, but doesn’t tell us why tenants choose to move so frequently instead of taking up the longer lease options available in NSW. The Australian Bureau of Statistics (ABS) answered this in their housing mobility research from 2013-2014, which looked at who is most likely to move homes and what drives the decision to move.

The research showed that people are most likely to move because they wanted a bigger or better home (17%) or because they were buying their own home (16%). Unsurprisingly, they found that renters were more likely to move frequently than homeowners, and that younger people move more often than people over 35.

The ABS also found that 48% of moves in the past five years were to homes within the same suburb or locality. We see this a lot at Taylors, with residents looking for their next home without wanting to leave the benefits of the Eastern Suburbs. 

So Do Long-Term Leases Lead To Long-Term Tenancies? 

Despite the possibility of a long-term lease, the data shows that most renters in NSW stay in a property for under two years. But it’s not down to whether or not they have an option for a longer stay. Instead, we can see that tenants choose to move on regularly, so flexibility seems more important than very long-term security. 

Instead of looking to long leases, landlords who want to keep a tenant for a long time should instead prioritise good relationships, excellent communication and proactive maintenance to create an environment a tenant will want to stay in. This is where a professional property manager can provide advice and add value

As for tenants wanting long-term security? Taking care of a property and being a reliable tenant often leads to extended leases and great references in the future.  

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