Wellington Propertyscouts

May Newsletter - 1st May 2018

1 May 2018 - monthly newsletter
Dear landlords, we hope you are settling into the shorter days (if you are in NZ that is) and the early stages of winter aren’t too bad where you are. This month’s newsletter is a little dreary (we’re sorry but blame the Beehive) so we apologise in advance. To make up for it, we’ve included a joke at the end of the newsletter for those who are still reading by that point…

Expert Opinion: If you hadn’t already noticed, the current NZ rental/property market is a really hot topic at the moment. Ashely Church, the CEO of the Property Institute, provides a lot of good and reasoned insight on the property market during his increasingly more frequent appearances on TVNZ’s Breakfast Show. If you are interested, there a number of his TVNZ interviews on You Tube. They are worth a watch!

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, 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 Governments proposed changes around the Residential Tenancies Act and other legislative changes will negatively impact landlords by increasing their costs. 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 (just ask Ashley Church).  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 have for some time been saying that the over-riding effect will be an increase in rents.  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. There is a perception by a lot of folk that the letting fee is like a bonus to letting agents in addition to the management fee we collect. I’m sure some of you have let your own properties before and know how difficult this can be.

The process from advertising the property to dealing with enquiries, hosting viewings and doing sufficient checks on the tenants to ensure they will be good tenants can be very time consuming. What’s more, we find that a lot of potential tenants feel no responsibility in keeping an appointment to view a property. Often we will travel long distances during the day and night only to be stood up by our potential tenant. Even when we have a set viewing time, if 10 groups book for the viewing we will be lucky if 3 or 4 groups actually turn up, particularly if it happens to be raining or it’s got a bit cold. What’s more, when processing an application we can spend a day calling references and doing checks only to find the group have found another place they prefer and forgot to tell us.

Before we get the violins out, we will stop there. I think you get our point that a letting fee is and soon to be was an important part of our income but one we work very hard for. Propertyscouts, as with all other management companies, will just have to adjust, it will be interesting how the industry as a whole will deal with this change. We were hopeful that they may just cap the letting fee, a weeks’ rent up to a maximum of $400 or so.  

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.  We can’t see how a one off fee of around $450 on average for a tenancy that can last for years is going to significantly help a tenant buy their first home.

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 likely take the blame.  More violins please…

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 months 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. 

Joke: How many ants do you need to rent out an apartment?                    Tenants!

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. 

Regards from the team at Propertyscouts   

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