Rent Controls, Do They Work?
In recent weeks, we’ve seen tenant advocate groups, as well as the Human Rights Commission, demand improvements for tenant rights, and once again, we see a call for rent controls.
There are other factors at play. There has been a slowdown in tenant movement. Towards the end of 2021, many rental properties were sold, creating high tenant movement as many landlords vacated the market. However, things have changed dramatically. With interest rates increasing as well as inflation now at its highest level in over 30 years, the property boom came to an inevitable stop.
We are also witnessing a brain drain as many young people head overseas to do their OE and seek better opportunities whilst immigration coming into the country hasn’t even come close to hitting pre-pandemic levels. Most people leaving New Zealand will likely be renting, and as these people leave the rental pool, they are not being replaced. In the last two years, we have seen double-digit rental growth in most regions across New Zealand. We do not expect that to continue.
Historically it would have been easy for the landlord to find a tenant. The quality of the property, as well as the advertising, could be well below par, though with demand for rental stock being high, landlords could get away with it. Things have now changed, and this is not a bad thing. With landlords now competing for a smaller pool of tenants, there is a greater emphasis placed on the quality of the product they are offering and the marketing quality.
There also appears to be a greater emphasis on who is managing the property. Research undertaken by New Zealand-based prop-tech company Renti highlights that most prospective tenants will search and apply for properties that professional property management companies manage rather than looking at privately managed properties. Their software helps process tenant applications for rental properties. For all tenants who applied for a property using their software in June, 81.1% completed a tenancy application for professional listings, and only 38.2% completed it for self-managed listings. It would be interesting to understand why this is the case. One may suspect the tenants would rather deal with a professional property management company as they should have a greater understanding of the rights and responsibilities of both parties.
If I am a landlord looking for a tenant in this market, I would be placing considerable emphasis on ensuring that my property is well maintained, presented as well as warm, dry and healthy homes compliant. Ensure the property is affordable to run as there will be a greater emphasis on energy efficiency. I would also ensure excellent marketing quality using professional photography with floor plans and digital walkthrough tours. Your property has to stand out. I would provide information regarding the level of compliance with healthy homes and, if possible, estimate how much it would cost to run the property regarding electricity and gas consumption. Make sure that your property is immaculate and look to rectify any defects that may hamper the property’s renting. Also, try to make the property as low maintenance as possible.
Think about your target market. Ask yourself whether you would be prepared to live in the property. If you wouldn’t, why would you expect a tenant to do so? Be open to allowing pets, and make sure you have researched what is happening in the market.
And finally, if you do not want the stress of it all, find yourself a professional property manager who can take the burden away. That may be the best investment you make.