If the residential rental market were the stock market
Then market commentators would say that we were in the middle of a ‘bear market’. The term ‘bear market’ is used to describe the stock market when stock values are falling and the overriding feeling is one of pessimism. While property values seem to be holding their own, just, there certainly does appear to be an ‘air’ of negativity amongst landlords. And it’s not hard to identify the source of the angst. The present Government’s proposed changes around the Residential Tenancies Act and other legislative changes will negatively impact landlords by increasing their costs, of that there is little doubt. Private landlords remain the biggest providers of residential rental properties in this country and it seems incredibly short sighted to negatively target the largest provider in such an important sector. With around half of all Kiwis now living in rental accommodation, the backlash, if the Government doesn’t get things right could be exponential. Industry experts (including us) have for some time been saying that the over-riding effect will be an increase in rents. Not convinced? Then think about these stats from NZ Property Investors Federation (NZPIF). According to their analysis, overall rental prices are up 6.1% in 2018 compared with the same period in 2017. And what’s worse for renters is that this is a higher price rise than during the last two years where rental prices increased 3.4% in 2017 and 3% in 2016. According to NZPIF and our own analysis rental price increases are set to continue as landlords continue to try to off-set their increasing costs.
Buy, sell or hold:
Last month we talked about the options for investors in this sort of market. Given that we’ve compared our present residential market to the stock market we thought that we would leave it to arguably the World’s foremost share market commentator and investor, Warren Buffet who made the following (now) famous quote when asked about his share buying strategy. Buffet said “Be fearful when others are greedy and be greedy when others are fearful”.
Twyford introduces Bill to end Property Managers from charging tenants a letting fee:
It’s very common practice for Property Management companies to charge tenants a letting fee at the beginning of a tenancy. The fee is normally equivalent to one weeks rent and helps property managers off-set the costs involved with setting up and commencing a new tenancy. In some cases, landlords are also charged a fee at the beginning of a new tenancy to cover fees that other PM companies separate out in their list of charges. According to Mr Twyford there is no justification for landlords passing this cost on to tenants and banning the charging of tenant letting fees will help make rent more affordable which will in turn help tenants save to buy their own home. Bloody rubbish! Is it just us, or can others see the problems that this will invariably cause the industry? For example, the Independent Property Managers Association (IPMA) recently surveyed their members and found that abolishing tenant letting fees will affect the bottom line of their business by 10 – 15%. Other industry surveys have shown that up to 80% of property management companies will endeavour recovering the cost from property owners by introducing administration fees or increasing management fees or a combination of both. And the best way for landlords to cover the increased costs will be rent increases. And in breaking news – it was recently reported that Mr Twyford accepted that abolishing letting fees was likely to result in rents increasing but justified this by saying that the letting fee is charged to tenants at a time when they have to find up to four weeks bond and two weeks for rent in advance. As rents invariably increase (which they will) the property management industry and landlords will cop the blame. Tenants and media commentators won’t drill down to identify that it was in fact the Government’s strategies that resulted in the increases.
Walker Weir strategies:
Obviously the proposed changes are a concern to us at Walker Weir. There aren’t many businesses out there (regardless of what industry they are involved in) that could afford to lose approximately 15% off their bottom lines. As a result, we, are looking at a range of strategies that we may implement to help off-set the negative impact on our business. What we are not going to do is panic. We will consider all of the options available and consult with as many industry experts as possible.
As a Property Manager there is nothing worse that contacting a landlord to advise them of maintenance that is required only to be told that they won’t or can’t do it as a result of not having the money. That should never be the case and that sort of response ‘no longer cuts the mustard’. Often when mentoring new investors we tell them to treat their landlord duties the same as they would any other business. Compare for example owning a corner dairy with being a landlord. How often will you, as a customer, keep going back to a dairy with very little or poor stock. The same applies for the quality of a rental and the landlords attitude to maintenance. Good quality, well maintained rental properties attract better tenants, better rents AND the tenants stick around. They stay on in the rental property because they understand that the landlord is trying to offer them the best the property will allow. And a final word on maintenance – The Residential Tenancies Act states that necessary maintenance must be carried out. It’s an unlawful Act not to carry out necessary maintenance.
Insulation: 2019 is just around the corner folks so you have just over 12 months to have your rental properties insulated to meet the new Government standards (if they aren’t already). Any property that is not sufficiently insulated will not able to be lawfully rented after June 2019.
Q. As a landlord how much notice do I have to give to the tenant if I want to visit the property?
A: This question follows on from last month’s FAQ which dealt with giving tenants 48 hours’ notice of an inspection and 24 hours’ notice to carry out repairs and maintenance. In some ways it’s a bit of a ‘trick’ question because the simple answer is that you don’t have to give the tenants any notice if you merely want to enter onto the property. For example, you want to speak in person with the tenant. However, if the tenant requests that you leave then you must do so immediately. Please don’t get confused. We are referring here to the likes of visiting the property and knocking on the door. We are not talking about entering the premises.
Heatpump and fire servicing reminder: For safety reasons it’s important that fires are cleaned yearly. Heat pumps should be serviced at least every two years.
Next Disbursement: Tuesday 15 May 2018.
Disclaimer: Given the opinions expressed in parts of this email it’s important that we make it clear that the contents of this email are opinions and observations and made in good faith. We suggest that in all cases independent legal and financial advice is sought.May 10th, 2018