A question we often get asked, by both tenants and landlords, is will rents rise in the coming year? The simple answer is yes, they will. Here are some of the reasons why:
As you would have read over summer, Tauranga, just like Auckland, has a serious rental shortage, especially quality rental homes. The shortage is a simple case of supply and demand. Our region continues to attract record numbers of new ‘migrants’ to our suburbs, but due to lending restrictions, increasing mortgage rates, and a significant increase in house prices, it is difficult for many of these people to buy a home in Tauranga. Therefore, many families moving here are looking for short or long term rentals. Their search is made even more difficult because many existing tenants are choosing to stay in their rentals long term, knowing that quality rental properties are hard to come by. So the usual demand for quality properties is exacerbated by increased migration and fewer home buyers, and this situation will unlikely change in the foreseeable future.
Other factors leading to rents rising include lending restrictions on investors and the new Government changes around rental property compliance. The Labour Government will also be cracking down on so-called ‘negative gearing’, where costs such as interest payments on a residential investment property can be used to offset tax owed on income from other sources.
Additionally, over the last few years there have also been extra costs for landlords such as rates and insurance increases, and costs associated with drug testing of properties. These factors, combined with more landlords exiting or choosing not to enter the market, means demand is high and supply is low, which leads to increasing rental prices.
Of course rising rents isn’t something new, the Trade Me Rent Price Index (a monthly analysis of the rental property market across NZ) shows that between December 2016 and December 2017 average rent rose 7.3% in the Bay of Plenty. However tenants shouldn’t be alarmed, as per our tenancy contracts, rent cannot be increased for 180 days from the start of the tenancy and a landlord is required to give 60 days notice of any increase in rent. Usually rent increases for our tenants are small and gradual.
If you are a Landlord in this turbulent property market, we are happy to discuss your options for a long-term strategy. Having the right plan and processes in place will to enable you to get through the next few years’ challenges and come out the other end in a stronger position. Remember, property investment is a long game and short-term losses or gains should form part of your overall long-term strategy.
For any other rental investment advice please phone us for a chat, we are happy to work through any questions you have and we offer free rental appraisals for landlords.
RealEstate.co.nz have released their October property report. An interesting facts to note:
In October 2007 approx. 47,958 homes were available for sale in New Zealand. In 2017 ten years on, the total numbers of homes listed was only 24,307.
As has been discussed in many articles recently, the trend in New Zealand seems to be a move towards long-term renting rather than buying a home. This trend of course is the ‘norm’ on many countries, especially in Europe, where families may rent a home for decades.
Here is the latest update, for the full report including graphs & maps please visit realestate.co.nz:
In October 2007, some 47,958 homes were available for sale in New Zealand on realestate.co.nz, the country’s largest property listing site.
Ten years on, the total numbers of homes listed has slumped to 24,307 (October 2017).
“The property market historically follows a cyclic trend, and this past decade has seen a steady increase in asking prices while the total stock for sale continues to fall,” says realestate.co.nz spokesperson, Vanessa Taylor.
“This is inspiring many Kiwis to think outside the square when it comes to letting go of the quarter acre dream, and recreating the notion of what makes a home,” she says.
“In October 2007, we were months away from entering the period of the global financial crisis.
“New Zealand got hit, albeit relatively lightly, but it was a period when lending was tight, house values dropped and new housing construction fell dramatically.
“The GFC hangover meant it took years for the property market to recover. Recently, as more Kiwis started to return to New Zealand permanently, along with the number of migrants from other countries, New Zealand found itself behind the eight ball when it came to sufficient housing numbers,” says Vanessa Taylor.
“It’s only in the last three years that the fall in available property for sale has been quite so significant,” she says.
In October 2014, total housing stock sat at 39,917, compared to 24,307 in October 2017, almost a 40 per cent fall.
“But it doesn’t mean that home ownership is out of reach.
“There is more creative thinking coming into our housing vernacular, such as the Tiny House movement, co-housing* with a central hub, as well as apartment and duplex options.
“The exciting thing is that as we move through to the next property cycle, we will have more options to suit our lifestyles, much like other large metropolitan cities across the world,” says Vanessa.
New property listings in October 2017 down 8.4 per cent
Real-time statistics from realestate.co.nz show that new property listings were down 8.4 per cent in October compared with the same month in 2016, with 10,778 homes newly listed for sale across the country.
“This is not a surprise. We have had a challenging winter and that dominated decisions, because people always want to show their homes in the best light.
“When there’s rain, wind and cool temperatures, prospective buyers tend not to venture out as much” says Vanessa.
“We also had an election with property as a significant focus, so it’s no surprise people would wait to see the outcomes.”
Every region in the North Island experienced a fall in new listings, with the exception of the Hawkes Bay which was up by 3.6 per cent compared to October 2016.
Auckland, which by its sheer size can impact the overall market nationally, experienced a 9.3 per cent fall in new listings. The 3,705 new listings were minimal in a market of this size.
In the South Island, Nelson registered the highest number of new listings for October compared to the same month in 2016, with 235 new listings.
Stock levels impacted by unique Auckland situation
While stock levels have been falling nationally over the past 10 years, in October 2017 they were up 3.9 per cent compared to the same month in 2016.
While new listings in Auckland fell 9.3 per cent compared to October 2016, total housing stock on the market increased by just over 17 per cent over the same period.
“Essentially this tells us that homes are not selling quickly in Auckland and this has had an overall impact on the national market,” says Vanessa Taylor.
This is also reflected in Auckland’s property asking price, which has been largely static over the past year (i.e. between zero and one 1% change in asking price each month). The average Auckland region asking price in October 2017 is $937,922.
“Auckland home owners are being realistic and nationally it’s still a sellers’ market, but less so in both the Auckland and Canterbury regions,” she says.
Theoretically, if no new listings came onto the market in Auckland and Canterbury and all existing listings were to be sold, there would be no houses for sale in both regions in 21 weeks. This is close to the long term average for both cities.
By contrast, if no new listings came onto the market in Wellington and all existing listings were sold, the capital city would have no houses for sale within nine weeks.
*Note: – Co-housing involves family homes being built in clusters of up to 35, around shared living spaces, gardens and communal facilities.
Tauranga City Council have once again put intensification of existing neighbourhoods back on the council’s agenda.
The Council’s urban strategy manager explained to councillors that it is “about reshaping communities… and not just about the numbers.”
In developing a new Urban Strategy for the 2018-28 Long-Term Plan, council staff have been investigating how to get more housing into established suburbs, especially those close to the CBD.
Read more about the Council’s plans in this Bay of Plenty Times article – Intensification is back: What might it mean for your block?
New landlords and property investors come to us on a regular basis, both for advice about investing in Tauranga but also with questions about the services we provide and the fees associated with that service. As a result of the many enquiries we receive we set up a Frequently Asked Questions page on our website. Here is a summary of what we have included on our FAQ’s page:
What rent am I likely to achieve and how long does it take to secure a tenant?
We provide a free rent appraisal to determine a ‘market rent’ for your property. The average timeframe to secure tenants is 14-28 days.
How often do you carry out rent reviews and can I be consulted?
The Residential Tenancies Act allows for rents to be increased every 6 months as long as the tenancy agreement provides for an increase. Clients can have input into rent reviews.
Can you take over existing properties with existing tenants currently managed by other individuals or professionals?
Renovations, repairs and maintenance — should I spend money?
We use a variety of contractors who are reliable, consistent, and offer value for money. Clients can also stipulate a maintenance spending limit or choose to have no maintenance carried out without their approval.
Interior décor which optimises rent and saves money e.g. paint, curtains, carpet — what materials are best?
Paint: Use the same colour paint on all your properties, both inside and out. We recommend a colour like cream, does not date and it is not offensive to anyone.
Curtains: Choose quality neutral colour curtains also as these won’t clash with a tenant’s possessions, and neutrals tend to set rooms off better. Net curtains are important to tenants for privacy and security reasons, especially in bedrooms.
Carpet: Choose a darker coloured carpet for rental properties, as experience has shown that the pale colours show marks more, and are harder to clean over the long term.
Should I rent my property furnished or unfurnished?
Often furnished properties in the suburbs have less demand than unfurnished. Mount Maunganui apartments generally have stronger demand as furnished properties.
Do you have your own Tenancy Agreement?
Yes. Connect Realty’s Tenancy Agreement is the result of many years research into what works best for the landlord.
What type of tenancies do you offer?
We offer both Periodic and Fixed Term tenancies.
How much bond do you take and what happens to it?
We secure four weeks rent as bond. The bond is receipted by us and lodged with the Department of Building and Housing as soon as it is paid by tenants.
When and how do I get paid my rental income?
All rent is payable weekly, fortnightly by the tenant into our Trust Account. Licensed Agents must hold all monies held on behalf of other people into such a Trust Account (Note: Not all property managers are licensed!).
What do you do if the tenant gets behind in their rent or damages my property?
We have a zero rent arrears policy and rents are checked daily. If tenants miss payments we contact them to request any missed payments are remedied immediately. The appropriate legal written notices are served.
What records do you provide me with?
Monthly statement and interim statements if necessary, including a complete statement with all rents collected together with all disbursements, including any accounts paid on your behalf, (like rates, water, and any authorised repairs) plus the fees deducted. It will also display the current tenants paid to date, the name of the tenant/s, and the property/ies. We can automatically send your accountant a copy.
Annual Statement: At the close of business for the year we send you an Annual Statement which summarises all the transactions of the financial year.
How frequently do you carry out inspections?
We complete an inspection at the beginning of a tenancy to record the details and condition of the property. When tenants vacate we carry out another called a “vacancy inspection” to again record the details and condition of the property. These inspections included in your management fees. We also complete routine maintenance inspections. We recommend that rental properties are inspected either quarterly (especially newer properties) or at least three monthly.
What do you do when tenants move out and there are damages?
If damages are identified then owners are informed ASAP. Sometimes the bond needs to be retained where the tenant has not left the property in a satisfactory condition or where there is damage which needs remedying.
For our full Frequently Asked Questions and Answers please see our Landlord FAQ page on our website.
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