Thrive and survive in year of challenges

New Property Investors Federation president Sue Harrison says despite the Government using private investors as a means to prop up their tax coffers which comes at the expense of tenants, the private property rental market is too important to fail.

Thursday, February 16th 2023

She says more investors translates into more rental stock, which eases demand levels in the rental market and helps overcome an overheating of rents.

“Most of all good stewards of tenants and smart investing makes our investments reap rewards.

Statistics show how much the Government relies on private landlords to provide rental accommodation, with about 85% of rentals privately owned.

“The Government has introduced significant residential tenancy legislative changes favoring tenants and alienating landlords over the past couple of years,” Harrison says.

“While it might be politically convenient to make landlords seem a cause of social problems this has created an unpleasant ‘us versus them’ culture between landlords and tenants.”

She says the biggest changes are just lining the Government and banks’ coffers.

“If we are smart enough to manage owning investment rentals, then we need to be smart enough to manage the expenses involved with that.

“The biggest are mortgage, tax, rates, insurance and repairs. If the costs escalate, we have no option but to ensure the rent is managed well.”

Harrison says in these times new investors are not being attracted to existing older houses, because of the Government deliberately choosing to enact legislation to steer them to new housing, so the rental market supply starts to constrict, which in a fair marketplace increases rents.

“In most cases keeping good tenants comes well before raising rents, but survival in the rental market business must always come first.”

On top of the Residential Tenancies Act (RTA) changes, the Reserve Bank has made a succession of major official cash rate (OCR) decisions over the past few years that have flowed through the housing market and are now escalating this year as mortgages roll of low fixed interest over to much higher rates.

“Banks are under tight controls to enforce interest and principal payments so it’s not surprise we are heading into a perfect storm for those sailing close to the leveraging winds,” Harrison says.

“After all, most landlords are kiwi mums and dads, who own one or two properties to secure their financial futures. These property investors take on a commercial risk and expect to receive adequate rewards.

“The real kicker is that if investors are hurting and reacting, it’s their tenants who suffer as well.

“What happens when the economic activity, which was encouraged by previous Governments’ is actively discouraged?”

She says investors are forced to defend themselves, their finances, mental health and future.

“For most mortgaged owners there is no option but to increase rents or sell. The result of Government policy flows through to end users.

“Whether a tenant or home buyer they ultimately pay, making housing less affordable."

“What happens when there is a shortage of homes to rent? Should the Government be building more homes as rentals due to lack of supply? Or should we have a democratic housing marketplace?”

Harrison says with the population increasing, rising investor activity is needed to assist with New Zealand’s limited rental market supply, advancements made for the build-to-rent sector and more Government assistance is needed to help shift more tenants into home ownership.”

She is urging investors to get along to meetings of their local property investors associations to interact with other investors and keep up with changes in the property market.


On Thursday, February 16th 2023 9:57 pm Antoinette cooney said:

An excellent article thank you! I am so tired of Landlords being considered as the ogres of society. Antoinette Cooney

On Thursday, February 16th 2023 10:31 pm Penny Darwin said:

The idea to remove interest deductibility was borrowed from the UK. However, in the UK there is a 20% tax credit. So NZ’s rules are far more harsh than the UK’s. It irks that the government U-turned and offered only certain existing build-to-rent developments interest deductibility in perpetuity. To qualify, developments need to offer tenants leases of at least 10 years. Tenants can ask for shorter agreements if they wish and the development will still qualify for the exemption. Tenants will be able to break their tenancy agreements at any time, with a 56-day notice period. I ask, why was this not offered to small landlords? I would love the opportunity to offer 10-year tenancies and qualify. I believe the reason is that this government is ideologically opposed to having family homes owned by landlords when they could be owned by individuals, and I think they have a point there. However, many landlords own buildings which best use is as rentals. In our case, we own inner city houses that families would not necessarily want as they would prefer to live in a suburb. With landlords avoiding second hand houses and families not in our buyer group, our ability to act as incentivised by government and sell was limited. We looked at selling anyway but another consideration was that we were reluctant to terminate the tenancies of our excellent, loyal tenants. Not only is the removal of interest deductibility harsher than the UK version, the policy is also arbitrary and unfair.

On Friday, February 17th 2023 4:50 am Peter Lewis said:

NZ residential developers are still subject to the RTA. Therefore - despite the PR - they cannot 'offer leases of 10 years'. All they can legally offer is a standard fixed-term tenancy, which of course can be offered by any landlord. The 10 year timeframe is probably quite unapealing to almost all tenants - even two years can be seen as unattractuive to most.

On Friday, February 17th 2023 9:24 pm Peter Lewis said:

Despite the PR spin developers are subject to the RTA, just like every other NZ residential landlord. As such they cannot offer 'a lease of at least 10 years', that is not a legally available option. All they can offer is a fixed term tenancy of that length. Any NZ landlord can do that, but most tenants are wary of entering into a tenency of that duration.

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