Sydney suburbs with worst tenants revealed

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.

New research has revealed the suburbs where a greater prevalence of tenant induced property damage, failure to pay rent and damaging weather events has resulted in the most frequent landlord insurance claims.

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, including Mount Druitt, Wyong, Liverpool and Campbelltown.

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An inner west house that went up for sale allegedly due to the tenant’s drug activities.

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

Regional suburbs with a higher frequency of landlord insurance claims over recent months were Dubbo, Tamworth and Maitland.

Allianz noted that the most common claims were for storm repairs, burst pipes, malicious damage and loss of rent.

The most common claims across the country were less than $2,000, followed by claims in the range of $2,000-$5,000. Allianz would not reveal the average claim value in the suburbs with the most claims.

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.

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“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.”

Property Investors Council of Australia director Ben Kingsley said most of the areas with high claims were outer or regional areas known for relative affordability.

Tenants were often in more fraught financial situations, Mr Kingsley said.

“Potentially rental increases have been a road too far, but anecdotally my experience is that some of these households aren’t great at managing personal finances and have a lot of credit card or store credit debts and little safety net,” Mr Kingsley said.

“And, when you have a lower socio-economic demography, you can have more broken families and stress around finances.”

With the potential for both scenarios leading to anti-social behaviour, the risk for damage to properties was also likely higher in many of these areas, he added.

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Investor Lakhwinder Singh, with his family, said owning property in many of these areas had a big upside: capital growth tended to be better. Picture: John Appleyard

More affordable regions could also face the brunt of any increase in unemployment, and were more likely to host single-income households.

“And, as more claims come in as a result of not being able to remove difficult tenants, that will increase landlord insurance policy costs (higher premiums) — which will be passed on to the tenants,” he said.

Nathan Birch, director of property management firm Blink, said it was the areas like Kellyville that were the most risky to be a landlord because the rents were relatively high.

“There are good and bad tenants anywhere but in somewhere like Kellyville, where the prices are nearly $2m and the rent is $800 or $900 a week, it’s a much bigger problem for the landlord if the tenant stops paying,” Mr Birch said.

Property investor Lakhwinder Singh, who is based in Western Sydney, said there was an upside to investing in some of the suburbs with a reputation for tenant “troubles”.

Landlords were advised to keep their lease agreements up to date.

“As an investment, properties in these lower socio-economic areas can do very well because the properties are often (undervalued),” he said.

“Tenants can be more trouble but you can counter that by budgeting more for maintenance. Landlord insurance is essential.”

Allianz Australia head of property claims Matt Anderson said property investors could make the claims process easier by making sure they continued to “meet their obligations as landlords”.

“Ensure you have a signed and up-to-date copy of the rental agreement,” he said. “This document is critical in verifying lease terms, tenant responsibilities, and conditions that may impact a claim.”

NSW SUBURBS WITH MOST LANDLORD INSURANCE CLAIMS

Liverpool

Mount Druitt

Riverstone

Kellyville

Campbelltown

Wyong

The Entrance

Dubbo

Tamworth

Maitland

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