Property Management

One in five tenancies could fall into arrears

The Covid-19 crisis will result in greater falls in rents and higher default rates in regions, or suburbs, with higher rents, according to property management companies.

Tuesday, April 14th 2020

A new survey, conducted by property management consultancy Real-iQ, attempts to gauge what might happen with rents around New Zealand - in terms of prices and also defaults - going forward.

The survey will be run fortnightly during the Covid-19 crisis and the results of the first survey, which was completed by 32 property management companies, are laid out in the consultancy’s latest newsletter.

It’s the rent default results which stand out, with the general expectation being that regions with higher are more likely to have a higher default rate.

Real-iQ director David Faulkner says property management companies in Auckland and Wellington are predicting default rates in excess of 20%.

“This is concerning and if they are correct, one in five tenancies will fall into arrears.”

After the first week of the lockdown, companies who completed the survey highlighted a rise in arrears from 3.23% at the beginning of the crisis to 6.57%, he says.

“This is inevitably going to rise and some areas, such as Queenstown, are going to be hit far worse than others.”

However, the survey shows that opinions are more divided about how much rents could fall or even if they will fall.

Over 40% (43.75%) of the companies surveyed believe rents will hold, while the rest were split as to how much rents could fall by.

While 9.38% think they could fall by 0-5%, 15.63% think they could fall by 6-10%, 18.75% think they could fall by 11-15%, and 12.50% think they could fall by 16-20%.

No one expects to see rents fall by more than 20%.

Faulkner himself thinks rents will inevitably drop and - using more gut feeling than data analysis - he believes a drop of as much as 10% could be seen nationwide.

There will be variances in different locations though, he says.

“For example, Queenstown may see a 20% drop while some lower-income towns such as Whanganui, Invercargill or Levin may hardly see a change due to the relatively low rents that these towns demand.”

The story is likely to be similar in the main centres where high-end rental suburbs may see a bigger hit as employers lay off staff or freelance workers find that their inflow of work dries up.

That means that suburbs such as Mangere or Manurewa in South Auckland and Stokes Valley in the Hutt Valley are likely to fare better.

Faulkner says his years in the industry have taught him that rent is primarily dictated by two things: people’s income and supply versus demand.

“If rents exceed more than 40% of the tenant’s net income, then they will likely struggle with payments. Incomes are going to decrease and rents will follow suit.

“There are other factors that will also contribute to falling rents – like the demise of Airbnb leading to a much-needed increase of supply of long-term rental property.”

The concerns highlighted in the survey indicate how important it is for property managers to have an open and constructive dialogue with both tenants and landlords alike, he adds.

That’s because there is an enormous amount of emotion, fear and stress involved in the current climate and tenants and landlords will both be feeling the pain and strain financially, as well as emotionally.

“Getting the balance right between protecting landlords and tenants while following the letter of the law and fully respecting each individual case generated by the situation can be extremely precarious.

“As many property managers are finding out, this must be done on a case by case scenario and delicately so.”



On Wednesday, April 15th 2020 3:02 pm John Butt said:

Your login details go via Sweden -, ping 152ms - so login is getting slower and slower, This took 10 minutes

Heartland Bank - Online 6.69
Unity 6.99
SBS FirstHome Combo 7.05
ICBC 7.05
China Construction Bank 7.09
Co-operative Bank - First Home Special 7.09
Wairarapa Building Society 7.15
ANZ Special 7.24
Westpac Special 7.29
ASB Bank 7.29
BNZ - Classic 7.29
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
TSB Special 6.75
China Construction Bank 6.75
ANZ Special 6.79
Unity 6.85
BNZ - Classic 6.85
ICBC 6.85
ASB Bank 6.85
Wairarapa Building Society 6.85
Westpac Special 6.89
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
BNZ - Classic 6.55
ASB Bank 6.55
SBS Bank Special 6.59
Kiwibank Special 6.59
AIA - Go Home Loans 6.69
Co-operative Bank - Owner Occ 6.75
TSB Special 6.79
Westpac 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50

More Stories

BREAKING: OCR 5.50% - Monetary Policy remains restrictive

Wednesday, February 28th 2024

BREAKING: OCR 5.50% - Monetary Policy remains restrictive

The Monetary Policy Committee today agreed to hold the Official Cash Rate (OCR) at 5.50%.

Sales dive to new depths – lending at low DTIs

Wednesday, February 21st 2024

Sales dive to new depths – lending at low DTIs

House sales have plunged to their second lowest level in about 40 years, only 2% up on January’s sales last year, which were the lowest since 1983.

DTIs will have no significant impact on house prices immediately

Tuesday, January 23rd 2024

DTIs will have no significant impact on house prices immediately

The Reserve Bank doesn't expect its proposed DTI restrictions to have a significant impact on house prices in the short-term.

RBNZ gives details of new lending rules

Tuesday, January 23rd 2024

RBNZ gives details of new lending rules

The Reserve Bank has reveled its proposed debt-to-income (DTI) restrictions alongside plans to loosen loan to value ratios (LVR) for residential lending.