Monthly Landlord Newsletters

Meeting with Associate Minister Hon. Barbara Edmonds: Update on Regulation of Property Managers and Meth Contamination Limits

If you’ve been around a while, you’ll know that here at Propertyscouts, we’re strong advocates for the regulation of property managers and we welcome the Government’s regulation proposal, which includes compulsory registration, licensing, training, and practice standards for individual property managers and their organisations. Under this plan, property managers would be required to complete training before commencing their roles and engage in ongoing professional development.

During a recent meeting with Hon. Barbara Edmonds, Associate Minister for Housing, Ryan Weir, Director of Propertyscouts, represented the Residential Property Managers Association of New Zealand (RPMA®). The focus of the discussion revolved around two significant matters: the regulation of property managers and the proposed changes to the meth contamination limits.

Regarding the regulation of property managers, there has been a change in leadership and a shuffle of portfolios, resulting in a reprioritisation of the government's goals and objectives. As a consequence, the regulation of property managers, along with the review of meth contamination limits, has been put on a slower track. Government officials have been assigned to other projects, and these matters will be addressed after the upcoming election.

Ryan expressed concerns about the proposed approach to the decontamination of rental properties in relation to meth contamination limits. One of the major concerns is that, in some cases, decontamination might be expedited while tenants remain in residence. This raises questions about the effectiveness and safety of such measures.

Moreover, Ryan also reiterated the importance of not excluding private landlords in the scope of the regulation. Currently, the focus appears to be on property management professionals, while private landlords, who represent a significant portion of the market (60%), have been overlooked. They stressed that this is a crucial opportunity to get the regulation right, as it may be challenging to include private landlords at a later date, especially considering that the Real Estate Authority (REA) is set to be the regulator.

We are grateful for the opportunity to have a seat at the table and voice our concerns to Minister Barbara Edmonds. It is imperative to carefully consider and balance the regulation of property managers and the meth contamination limits to ensure the protection of both tenants and landlords.

Understanding the Implications of Impending DTI Rules for Landlords and Investors

In a recent development, new debt-to-income ratio (DTI) rules on mortgage lending may be implemented by April 2024. These rules aim to limit the amount individuals can borrow based on their annual income, which will have significant implications for property buyers, particularly landlords and property investors. Let's take a look at what you need to know:

• Effect on Investors: Experts predict that the new DTI rules will hinder many investors' ability to purchase multiple properties, curbing their capacity to take on additional debt and dampening enthusiasm for portfolio expansion. 
• Long-Term Game Changer: DTIs will transform the investment landscape by slowing down house price growth, aligning it with income growth and ensuring long-term financial stability.
• Reshaping Borrowing Strategies: Individuals who have previously been relying on borrowing against increased equity may face challenges, as large portfolios and higher existing debt levels may restrict securing additional properties for years once DTIs are imposed. This will require investors to exercise patience as their income gradually grows to service higher debt levels.
• First-Home Buyers and Exemptions: DTIs can also impact first-home buyers, but exemptions for new builds, construction loans, and property remediation projects offer opportunities with lower deposit requirements and exemptions from interest deductibility rules.
• Considerations for the Future: While the specific DTI ratio remains uncertain, understanding the impact on borrowing capacity is crucial for long-term wealth accumulation. Non-bank lenders may end up providing competitive alternatives as they may not be required to impose DTIs. 

As the true consequences of DTI ratios for property buyers unfold over time, it is crucial to remain well-informed and flexible in your borrowing strategies. Stay ahead of the curve as we navigate this new era of mortgage lending regulations, ensuring your investment plans align with the changing landscape.

Fears of Rental Accommodation Scarcity as Landlords Consider Selling Properties

There is growing concern over a potential shortage of rental accommodation as a recent survey reveals that a third of landlords are contemplating selling their properties. Factors such as tax changes, rising interest rates, and compliance costs related to healthy home standards have already prompted some investors to exit the market, potentially impacting the availability of rental housing.

The decision to phase out interest deductibility for residential landlords, except for new builds, has also contributed to landlords' struggles and is a key reason behind their consideration to sell rental properties. A survey of property investors showed that 32 percent are contemplating selling due to this tax change. The Auckland Property Investors Association warns that if a significant number of landlords exit the market, there is a real risk of rental accommodation becoming scarce, potentially affecting thousands of properties.

While the situation may present opportunities for first-home buyers, with potentially lower competition in the housing market, those unable to afford to buy a home could be the most affected. As rental stock decreases, rents are likely to increase, posing challenges for those reliant on renting for their housing needs.

Stolen Cabin Recovered: A Tale of Luck and Vigilance

In an unexpected turn of events, a stolen cabin has been recovered and returned to its owner in Hamilton after a vigilant stranger spotted it on a rural property in Waikato. Natasha Middleton, the relieved owner, received a timely Facebook message that led her to the whereabouts of the purpose-built cabin, which had been taken from her rental property by daring thieves using a crane. To her surprise, she found the cabin sitting in plain sight. With the assistance of the police, who secured the cabin to prevent further movement, Natasha was able to reclaim it and bring it back to its original location. Although the cabin suffered a few scrapes and bruises during its ordeal, Middleton considers herself fortunate. This incident serves as a reminder for other rental property owners to review their security measures and ensure the protection of their valuable assets. After all, you never know when someone might come along with a crane.

Property Market Downturn Showing Signs of Easing

Property values in New Zealand continued to decline in May, with a 0.7% decrease, but there are indications that the downward trend is slowing down. The annual rate of change has eased, suggesting that the current downturn may be reaching its end. Although average values nationwide are still 10.2% lower than the same period last year, they remain $194,000 higher than pre-COVID levels. The Head of Research at CoreLogic NZ, Nick Goodall, highlighted positive signs such as moderating house price falls and the expected peak of the Official Cash Rate, which may provide relief for homeowners. However, concerns about affordability and the impact of policy changes on property investment remain.

Policy Polarisation: Impact on Mortgage Advisers and Property Investors in Upcoming New Zealand Election

The upcoming New Zealand election is set to have a profound impact on property investors and mortgage advisers as the housing policies of the Labour and National parties diverge significantly. Under Labour's tenure, several measures have been implemented, including the removal of tax deductions on mortgage interest payments and extended Brightline test periods. In contrast, National vows to reinstate tax deductions, shorten the Brightline test, and reverse certain rental regulations. Property investors are closely monitoring the election, with sentiments varying based on party preferences. Ryan Weir, Director of Propertyscouts NZ, emphasises that a change in tax deductibility rules under a National government would enhance cash flow for investors and restore the appeal of property investment. Conversely, if Labour is re-elected, Weir believes that house prices will stabilise but not grow as rapidly as under a National-led government. The removal of interest deductibility is viewed as a significant game changer for investors.

June 2023 Property Investor Insights by Tony Alexander

Tony Alexander has shared some notable investor insights from the last month:

• With mounting interest rate pressures, investors, on average, are giving more thought to selling their properties.
• The loss of interest expense deductibility is becoming a growing factor motivating investors to consider selling.
• A mere 55% of investors intend to hold onto their properties for at least ten years or indefinitely, marking a record low and falling below the two-year average of 64%.
• Rising insurance costs are causing increasing concern among investors.

The Latest Ask An Expert from Within the NZ Property Investor Magazine | July 2023

Question: I have offered a property to a tenant to rent by emailing them the tenancy agreement. I have signed it, but they have not signed it yet. Unfortunately, my circumstances have suddenly changed, and it no longer suits me for this tenancy to go ahead. I'm worried that, because I've issued a tenancy agreement, I've committed and I can't withdraw the offer. Do I have the ability to withdraw the offer or am I legally bound once the tenancy agreement has been issued?

Answer: You can withdraw an offer as long as the tenants have not communicated acceptance of the offer. If the tenant has communicated acceptance, then it is too late, and an unconditional tenancy agreement is created. The moment the tenant communicates acceptance, an agreement is made that is binding on both parties.

To prevent this tenancy from going ahead, you must act swiftly to withdraw your offer, preferably by phone and in writing. By promptly notifying the tenant about your changed circumstances and the withdrawal of the offer, you can avoid entering into a binding agreement.

To help you in the future, let me explain the correct procedure for signing a tenancy agreement. Contracts are fundamentally based on the concept of an offer being made and accepted. Turning our attention to the concept of property ownership, you never encounter a scenario where a vendor initiates an offer to purchase their own property; such a notion would be nonsensical. In the realm of contracts, it is consistently the prospective buyer who assumes the role of making the offer. ln tenancy law, it should always be the tenant making the offer, not the landlord.

The process:

• Start by sending out an unsigned tenancy agreement. 
• To commit to taking the property, the tenants sign the tenancy agreement and send it back to you. That's known as making the offer. 
• If you accept the offer, you do this by signing the offer and then communicating the acceptance of the offer to the tenant. This is usually done by emailing the signed tenancy agreement back to the tenant where they can see the signatures for themselves. 
• That act of communicating the offer creates the binding contract.

If you follow this process in the future, it will prevent the situation you're currently facing.

Propertyscouts City of Sails Opens its Doors in Auckland

We are thrilled to announce the opening of our latest franchise, Propertyscouts City of Sails, located in Auckland, also known as the "City of Sails."

At the helm of this new venture is Business Owner & Operator, Tony Mitchell. Tony, is a seasoned professional, bringing with him a wealth of knowledge and expertise. With a strong background in business, marketing, financial markets, and investing and trading, Tony is well-equipped to provide exceptional property management services and cater to the unique needs of landlords in the Auckland region. Hear from Tony.

If you or anyone you know owns an investment property in the Auckland region and is seeking reliable and professional property management services, we encourage you to reach out. You can find his contact details on the Propertyscouts City of Sails website. 

Overcoming Common Challenges Faced by DIY Landlords

If you’re reading this, it’s likely that you have already entrusted the management of your investment property to the care of one of our very capable property managers. If not, or you’re considering managing your own property, this one’s for you. 

Being a DIY landlord comes with its fair share of challenges. From finding reliable tenants to managing legal obligations, it's important to be prepared for the hurdles that may arise. Here are a few common challenges faced by DIY landlords and practical solutions to overcoming them.

Challenge: Tenant Screening 

• Solution: Conduct thorough tenant screenings in line with the requirements of the Privacy Act 2020. This includes background checks, credit checks, and reference verifications. 

Challenge: Legal Compliance 

• Solution: Stay informed about relevant NZ legislation, especially the Residential Tenancies Act 1986 (RTA) and Amendment Act 2020. Seek legal advice when needed and utilise resources such as Tenancy Services or other credible online platforms for guidance.

Challenge: Property Maintenance 

• Solution: Conduct routine property inspections, address maintenance requests promptly, and have a reliable network of contractors for repairs. Create a maintenance schedule and set aside funds for unexpected repairs.

Challenge: Rent Collection 

• Solution: Implement clear rent collection procedures, including electronic payment options. Maintain open communication with tenants and address payment issues professionally and promptly.

Challenge: Tenant Communication and Conflict Resolution 

• Solution: Establish open lines of communication, respond promptly to inquiries or concerns, and provide clear instructions for reporting maintenance issues. Approach conflicts calmly and consider mediation or professional advice when necessary.

Quote to Ponder

"In the realm of challenges lies the gateway to growth and transformation" - Bryant McGill

Next Disbursement Date - Monday 17th July 2023

Disclaimer

Given the opinions expressed in parts of the email it’s important that we make it clear that the contents are opinions and observations and made in good faith.  

Propertyscouts NZ (2020) Limited, trading as Propertyscouts, and its associated parties (including directors, agents, employees, officers or otherwise) have attempted to provide   this information to the best of their ability but do not make any representations or warranties of any nature (intended or implied) as to the accuracy of the information on this communication. All recipients of this communication should conduct and rely on their own enquiries in relation to the information on this communication.

The information available on the properties listed for sale, rent or otherwise, has been obtained from the vendor or landlord of the property and the appropriate professional service providers. We do not and cannot verify or guarantee the accuracy of the information obtained in relation to the properties.

The information and/or materials available in this communication are intended to be general information only and may be changed at any time, without notice to you. The information and/or materials in this communication should not be relied on under any circumstances as a substitute for legal, financial, real estate, or other professional and/or expert advice. To the maximum extent permitted by law, Propertyscouts and its associated parties disclaim all liability, responsibility, and negligence for any direct or indirect loss or damage suffered by any person arising from the information and/or materials presented in this communication or any information and/or materials that arise from it.