Exposed: suburbs with highest tenant damage, rent loss claims

They’re the suburbs around the country where owning an investment property has become riskier because of extreme weather events, more tenants defaulting on rent and malicious property damage.

Exclusive insurance claims data from Allianz has revealed the capital city suburbs that had the most landlord insurance claims over recent months, pointing to a growing problem for landlords.

The study, which examined claims across NSW, Victoria, Queensland and South Australia, indicated some of the areas with the highest rental returns and most accessible prices also attracted more frequent claims.

Tenants in these areas were reported to be more likely to skip on rental payments or inflict property damage, while some areas were often frequently in the line of natural disasters.

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Real life tenant damage in Sydney rental homes.

Nathan Birch, director of property management firm Blink, said the reward for buying homes in many of these riskier areas was better capital growth.

“They tend to outperform the market,” he said. “You may pay more in repairs but the owner can make more when they sell. It’s not a (clear cut) thing.”

The Allianz data showed the most common landlord insurance claims in each state were for storm damage, burst pipes, malicious damage and lost rent.

But there was also great variance in the types of landlord claims made across areas, with each state seeing unique trends emerge in the types of areas where claims were higher:

VICTORIA

See the Victoria suburbs with the most claims

Victorian landlords were making vast numbers of insurance claims across some of Melbourne’s most investor-heavy suburbs, with increased rental protections being blamed.

Allianz data showed more landlords were looking to recover financial hits on their homes in affordable areas like Hoppers Crossing and Frankston.

With the insurer revealing unpaid rent was among the top reasons for claims, industry experts have warned it’s adding fuel to the state’s property investor exodus.

PICA chair Ben Kingsley said rental reforms were pushing investors out of the market in Victoria.

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Separate data from Ray White showed landlords were selling up at a significant rate in many of the suburbs.

Property Investors Council of Australia director Ben Kingsley said most of the places with high claims were outer or regional areas known for relative affordability, meaning in many instances tenants were in more fraught financial situations — making claims for lost rent more likely.

However, with Victorian investors also now facing an increasingly difficult task to move tenants on if they stopped paying their rent, Mr Kingsley said many landlords were selling instead. “Government (is) choking the private rental investor out of this market,” he said.

NEW SOUTH WALES

See the NSW suburbs with the most claims

Cheaper Western Sydney and regional NSW suburbs have become some of the riskiest areas to be a landlord despite being increasingly popular with property investors due to the higher rental returns.

The data from insurer Allianz laid bare the more challenging markets to be a landlord at a time when still elevated interest rates have been encouraging many landlords to exit the rental market.

Suburbs with the most landlord insurance claims tended to be in gentrifying lower socio-economic areas.

A rental property in Sydney’s inner west that went up in smoke after it was reported the tenant’s cannabis crops caught fire.

There were also a mix of new development hotspots with higher claims and where rents were relatively high.

Finder.com.au insurance expert Tim Bennett said landlord claims tended to be larger for older homes, which often had “hidden risks”.

Areas where renter turnover tended to be higher also attracted more claims as moving tenants created more wear and tear, Mr Bennett said.

“Socio-economic factors can play a role,” he said. “Places experiencing economic stress may see more incidents of missed rent repayments or tenant-related damage.”

SOUTH AUSTRALIA

See the SA suburbs with the highest claims

Many of South Australia’s riskiest markets for landlords were areas regularly featured in property investment hotspot lists, suggesting hidden traps for investors.

Four of the five SA suburbs flagged by Allianz as attracting the most landlord insurance claims were located in Adelaide’s northeast.

Many of the suburbs with higher landlord insurance claims were in Adelaide’s north.

It’s a market where investors have been chasing positive cashflow over recent years, with new landlords often attracted to low median purchase prices and higher rental returns.

Tenant-related claims were the most common in parts of Adelaide, according to Wayne Johnson, EBM Property Insurance state manager SA.

“The main areas of concern in those places is rent default,” Mr Johnson said. “Then there’s tenant damage and then there’s legal liability, where the tenant hurts themselves, or worse.”

Mr Johnson said that areas such as Elizabeth had suffered socio-economic decline over the years since major employers such as Holden scaled back operations or closed down.

QUEENSLAND

See the Queensland suburbs with the most claims

Cyclone claims rated in the top five most common claims for Queensland, according to Allianz.

But Brisbane claims were often for lost rent and suburbs with more affordable home prices tending to attract more claims.

Landlord claims in Queensland were often weather related.

Bold Property Management director, Alison Farrell said from her experience in the Brisbane market, at least 80 per cent of landlord insurance claims were for rent arrears with a value between $2000 and $5000.

“We see more claims in low-to-mid-range rentals in outer suburbs,” she said.

“Higher income tenants will not rent in lower socio-economic areas generally, so landlords can only select from applicants that actually apply. The pool is what the pool is.”

Ray White Collective principal Haesley Cush said claims for houses tended to be higher than for units.

“Since 2011 we’ve also faced a number of weather events that have contributed to the number of landlord insurance claims,” he said.

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