Blog: The Landlord says...

I take it all back! Last week I made a distinction between landlords and property investors. It seems from a couple of comments to that Blog that differentiation wasn’t liked.

Fair enough. The point was to try and make a distinction between those who prefer the DIY approach and those that are happy to outsource management.

I think the key point to remember is that all investors are landlords and, while they invest to make money, they are also providing a service to other Kiwis.

One of the reasons I chose to talk about property management again this week (besides taking my previous comments back) was a story on Landlords.co.nz about a significant increase in the number of applications being made to the Tenancy Tribunal. Many of these applications relate to unpaid rent.

It is clear that things are tough out there and the one thing we are yet to see is rising unemployment. For the past few years New Zealand has done extraordinarily well to have a very low unemployment rate, both historically and compared to other countries.

That will change. There is little doubt about it. Next year thousands of people are likely to lose their jobs and many of these people will be tenants.

There is a huge need for investors to make sure they are managing their investments well and taking action quickly if the need arises.

In this piece the president of the NZ Property Investors Federation, Martin Evans, gives some good tips to help investors get through this difficult time.

The other thing which was interesting about last week’s Blog is that I thought some people may bag property managers. It seems there are plenty of people happy with the service they provide – but make sure you find a good one.

I’ve always been a bit of an advocate for property management – as long as it’s well done. However, sometimes I think my view isn’t shared by other property investors.

There is definitely a group of investors, the ones I would call landlords, who enjoy managing their properties, whether it is the repairs and maintenance or dealing with tenants.

However, for the other group, who I call investors, getting a manager to look after things makes sense.

There’s always been friction between the two groups of managers. With the licensed ones being highly critical of the other group.

However, this whole sector is about to get a bit of a shake-up; both from a regulatory angle and from competition.

As part of the real estate agents reform bill the Department of Justice is looking at how the sector operates and could well put a bigger set of rules on managers. Maybe it would even force the two groups together?

On the competition front www.landlords.co.nz, ran an interesting story this week on a new crowd who are offering flat fee management services.

Instead of charging a percentage of the rent (around 8%) they are offering to do the job for just under $900 a year.

No doubt people will compare this to the flat-rate real estate service, tried unsuccessfully by The Joneses. I’m not sure the two are directly comparable because of the way sales and property management operate.

I’m finding investors are showing a lot more interest in having their property managed and no doubt the flat rate option will be appealing.

One of the bigger real estate websites in New Zealand, allrealestate.co.nz, is being closed by its ASX-owned parent company REA Group.

The company plans to close the residential real estate site at the end of this month, but will continue with its commercial site.

The company isn’t commenting on the closure, other than to make a basic announcement. However, it appears that it has proved very difficult to compete with the two market heavyweights, TradeMe and realestate.co.nz.

Added to that agents are tightening their belts and the number of sales being completed each month have fallen significantly.

This has been shown in the latest Real Estate Institute figures released yesterday.

The closure of the site is a clear illustration that the market is tough out there, but also one needs to remember that REA has operations in a number of countries and it probably wants to concentrate on markets where it can make a buck at the moment.

It’s also interesting as allrealestate.co.nz has been a master at promoting itself and presenting a positive image to the market.

Over the next few days we are going to start seeing the latest house price sales and volume numbers and I am sure they will be eagerly awaited.

One of the trends in the housing market is that normally, come spring and summer, there is a pick-up in sales activity. After a sad winter, where volumes have been tiny and prices falling, there is plenty of angst building over whether there will be a turnaround.

I saw a graph the other day which compared site traffic on one of the big real estate websites and compared levels to the past two years.

What grabbed my attention is that it showed there was more activity on the site coming into spring this year, in line with trends of previous years. The assumption being that this increased site activity could be a precursor to an improvement in the market.

However, it appears to have been stopped dead in its tracks recently, September 17 actually. Since that date activity has fallen off noticeably. The conclusion being that this was not a good omen for the market.

Added to that there is another highly negative report from an economist today, saying “If there was one time in a lifetime to be negative about property market prospects, especially residential property, this is it!”

Another interesting story this week was Alistair Helm at realestate.co.nz suggesting the Waikato property market may be a ‘bellweather’ region. Statistics show Waikato was one of the first regions to go into the slowdown.

I have no crystal ball of what will happen, but there is anecdotal evidence things may not be totally awful. Several people – and not the regular real estate industry cheerleaders – have noted that things have picked up a little.

Just driving around it is evident there is plenty of stock in the market and it appears an increasing number of sold signs are going up.

It seems like a time to be very cautious out there, and one would think that it is a buyers’ market at the moment. Whether that is happening or not will become clear over the next week when the reports come in.