Blog: The Landlord says...

Property investors are losing money from delinquent tenants because of delays in getting hearings at the Tenancy Tribunal.

NZ Property Investors Federation president Andrew King said it is a big issue and needs to be fixed quickly as it is costing landlords money.

“At the moment we are losing money,” he says.

Normally landlords can issue a 14-day notice to tenants when there is a problem such as unpaid rent and apply to the tribunal for an order.

King says it was possible to get tenants out of a house in three to four weeks.

In some areas that process is taking up to three months because of delays at the tribunal.

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King says there are a number of reasons for tenants not paying rent, including the state of the economy, however tenants can make applications to WINZ for help.

He says news of this situation is getting known and some tenants are just having a go and not paying rent.

In some cases the tenant leaves and the landlord can chase them for unpaid rent, however some are staying put which means new tenants can’t be housed.

Housing minister Phil Heatley acknowledges there is a problem.

He says issue is about scheduling of court time and the e Department of Justice is making 10% time available to the tribunal for hearings.

Forget pulling the rug out from someone, Westpac  has gone one better and pulled the rug, floor, foundations, walls -  the whole house in fact.

The bank took possession of a family home after they failed meet mortgage payments – by carrying the property off on the back of a truck.

They were told they had one hour to remove their belongings from the home they had lived in for 18 years before workmen arrived to chainsaw through the foundations and remove the house.

Westpac refused to comment on the repossession, citing the fact that the legal owner was the ex-wife of one of the homeowners and no longer resident in the property.

However, Aaron Sewell, who serves court documents on people, said that while taking boats and property for mortgagee sales was not unusual, such a literal repossession was a new one for him.

“I’ve never heard of that [taking a house] ever before,” he said.

Going from chalk to cheese – or more appropriately Prince to pauper – Westpac also featured in another property story this week.

The bank’s New Zealand boss George Frazis has vacated his exclusive Paritai Drive property in Auckland and reports suggested he may find himself before the Tenancy Tribunal over allegations he broke a lease agreement and skipped out on $134,000 in rent.

The good news though for home hunters is that the rental is back on the market at just $3,400 a week.

No further details of the dispute between Frazis and the home’s owner, James Kirkpatrick, have been forthcoming, however the Landlord humbly suggests Kirkpatrick could follow the example of a fellow landlord in the UK in future. . .

Simon Everingham has taken a novel approach to stop his tenants skipping off with the GBP15,000 he says they owe him.

He hired ten skips and used them to block off access to his property.

He took the unusual step as American tenants Dan and Christina Herring planned to return to the States and he feared he would never get his money back if they left.

Previous attempts to block access to the property were thwarted when the Herrings employed friends to carry objects – including a piano – through a neighbouring field to a removal lorry, prompting Everingham to order an additional six skips and use mattresses and sofas to further hinder their efforts.

“This isn’t how we imagined our last year,” said Mrs Herring.

One of the questions at the moment is whether property investors are selling up post the Budget or continuing on?

Reading the headlines there are conflicting views. Our survey at Landlords.co.nz shows that very few investors are planning to quit the market due to the removal of the ability to claim depreciation and changes to LAQC rules.

However, others suggest that there is a sell off happening.

Of course I will be a little subjective on this and say that our survey sums up the mood of the market pretty accurately.

We are finding little evidence of a mass sell off and looking at real estate listings it doesn’t appear landlords running for the hills. Indeed if you look at REINZ’s numbers today it is becoming more of a buyers’ market and investors will be in on the action.

It was suggested that maybe the survey is a little skewed as readers of the NZ Property Investor Magazine and Landlords.co.nz are, let’s say, a little more professional and do some more research on their investments than others. (I couldn’t possibly comment).

Then there was this story yesterday that residential property investors in Canterbury are quitting “en masse”.

A sale of 20 properties in a metropolitan city doesn’t seem like en masse. On closer inspection the story is actually good news.

Investors are selling for a variety of reasons. Some of them are getting rid of underperforming assets. Others are highly leveraged and have investments don’t stack up. Others have had bad experiences and poor advice.

What is good about this? The fact that investors are getting rid of non-performing assets is good. Why continue to hold onto a dud? Maybe these people will buy more property? Yes, the Budget will force out some people who probably shouldn’t have invested in property in the first place.

As for whether there will be a wholesale exodus from investment property I say no. Many people like property as it is an investment they can touch and feel and have control over. In fact it is one asset class where the investor can actually add value.

Many investors have no desire to put money into shares, bonds and finance companies – partly because they do not trust the people who run them and they can’t “see” what happens to their money.

There is a lot of head scratching going on over the future of home loan rates this week. As I said last week the Reserve Bank is saying its base official cash rate is likely to stay around the 2.5% mark until 2010 and home loan rates should stay down.

However, the market is disagreeing with the central bank, and saying that rate increases will start early in 2010. A wrap of what the economists are saying, now they have had some time to digest the RBNZ announcement and review the market reaction, is here.

This split in opinion is quite critical for borrowers. Most experts, whether they are economists or mortgage brokers, are saying the best strategy at the moment is short-term rates. Go for six-month or one-year terms and look to roll them at maturity.

However, many comments to the previous Blog suggested going long makes the most sense at the moment. A couple things to consider are that long-term rates, particularly five-year rates, are sitting at their historical average and are very close to where they were a year ago.

Short-term rates are some of the lowest on record, and as this graph shows, are significantly lower than a year ago. Indeed the six-month rate is more than 400 basis points lower than this time last year.

A little reported piece of news in the past week is something which looks good for landlords, and maybe not so good for tenants.

That is the reporting back of the Residential Tenancies Bill to Parliament. Now this bill is the bible which both sides of the housing market have to obey. The current act is more than two decades old and there has been lots of talk of changes to it in recent years.

I suspect many tenants will have wished Labour had made more haste with this project as they would have ended up with a better outcome than they are now facing.

Landlords on the other hand are pretty happy that National is now running the show on this one, as the bill put back in the house over the past week shifts the balance of power more towards property investors and landlords.

Both the NZ Property Investors Federation and the Real Estate Institute are happy with the direction it is going.

Indeed, Richard Evans from REINZ’s property management group says in the past the rules tended to favour the tenants, but now they “restore the balance”.

His view is that in the past people were put off property investment because of the difficulties around tenant management, but this new set of rules (if passed) will “encourage  people  to invest in property again”.

A key issue is if the bill gets through Parliament. I suspect it will, but I wouldn’t be against a wager that Labour and the Greens will kick up a big fuss about some of the changes.

Their fault though for not moving on the changes when they had the chance. After all they began the “reform” process early on in their nine years in power.

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.