Over the past twelve months, we’ve seen soaring house prices and a plethora of new legislation impacting how residential rental properties can be managed. Navigating these changes amidst New Zealand’s COVID-19 Delta outbreak has meant a challenging year for private landlords and professional property managers. We caught up with Sharon Layton, Principal of Quinovic Merivale, Lisa Anderson, Principal of Quinovic Mount Maunganui and Simon Tavendale, Principal of Quinovic Palmerston North, to look back at New Zealand’s rental market this year. Due to Auckland’s 4 month-long lockdown and the associated impact on the city’s rental market, we have excluded Auckland from this specific review.
A multitude of new laws and regulations came into force this year, impacting how private landlords and property managers can operate in the current rental market. The most significant changes in legislation affecting the rental market this year have been:
These changes in legislation have proved challenging for many property investors. The compliance requirements are becoming increasingly complex, causing many investors to seek professional advice.
In August this year, the COVID-19 Delta Outbreak forced New Zealand into its second national level 4 lockdown. Navigating legislative changes amidst lockdown restrictions added more pressure on property managers and private landlords. Despite the challenges property managers faced under lockdown restrictions, there were creative solutions to ensure some essential operations could continue. Under level 3, for instance, property viewings took place virtually. There were also precautions in place if any critical maintenance was required under the higher alert levels, ensuring the safety of tenants and contractors.
Like many areas of New Zealand, the demand for housing in Christchurch is exceeding the available supply. However, there has been a significant shift from holiday rentals moving on to the long-term rental market. Christchurch was a popular destination with international tourists before New Zealand’s borders closed on 19 March 2020. Sharon explained that many of the small units of one or two bedrooms previously available on short-term rental holiday rental platforms such as Airbnb are now becoming available for long term rental, translating to an increase in the supply of these smaller properties at the moment.
Property prices in Palmerston North have risen significantly this year, directly impacting the city’s rental market. Simon noted that rental yields are down and now sitting around 3.5% - 4%. Meaning, house prices are rising higher than rents which ultimately impacts the short-term profitability of rentals for investors. In Simon’s experience, there has been a decrease in interest amongst investors. If you are looking to invest in residential property, it is important to enlist the help of experts so they can better understand your investment goals and help you work towards a solid investment strategy.
The demand for rental properties in the coastal areas around Mount Maunganui continued to grow this year. Stock levels of residential properties are low, which is pushing rents up. Lisa has experienced a high volume of enquiries for residential properties; however, there are simply not enough houses. Hopeful tenants are reaching out from overseas and MIQ facilities months before arriving in New Zealand because they know the supply is low.
Lisa, Sharon and Simon share their experience on how property investors are reacting to changes in the market:
As compliance deadlines for new legislation approached and hefty fines were introduced for those not following the new requirements, private landlords have begun seeking the help of professional property managers. In Lisa’s experience, many investors are relieved to be switching to a professional property management service. However, some are choosing to upskill in the area in order to adapt to the ever-changing landscape.
Changes in legislation have impacted the rental market, and some investors are shifting away from residential property. In Simon’s experience, investors in Palmerston North are now leaning towards commercial property investment as opposed to residential property. Sharon has also experienced a change in investor behaviour, stating, “Some owners are taking the opportunity to sell-off and re-invest into new build homes, whilst others are at the stage of life where they will simply enjoy the benefits of their investments.”
Property investment is viewed as a relatively safe investment. However, with the changing legislation and soaring house prices, the purpose of property investment should not be short term financial gain. Instead, investors should consider this as a long term investment.
Ensure you have a great investment team around you and enlist the help of property management experts. Rental properties are becoming increasingly complicated to manage, and hiring a professional property manager can give you peace of mind, knowing your investment is in safe hands.
Property managers ensure the day-to-day management of rentals is in the best interests of both the investor and those living in the property. Start the new year on the front foot and get the help of an expert to manage your investment property.
Regulation of the property management industry ensures property investors and those living in rental properties are protected. As it stands, anyone in New Zealand can become a property manager. With property management becoming an increasingly complex industry, more regulation is welcomed.
Property management is a huge responsibility and should be held to a high standard. Lisa pointed out that property managers are entrusted with their client’s investments and play a role in creating communities that we all live in.
There is a call for any regulation of property management to sit separately to The Real Estate Institute of New Zealand (REINZ). This is to allow rules to be tailored to property management specifically.
If you have any questions about investing in a property, get in touch with your local Quinovic office. We’re a nationwide team of property management experts and have managed over 100,000 tenancies since 1988. No matter how big or small your question is, we’ll be happy to help. Ask Quinovic today.
