Monthly Landlord Newsletters

Crystal ball gazing

Every now and then we like to drag the crystal ball out, give it a polish, cross our fingers, and come up with some general predictions about what might happen in the property market in the next year or so. It’s a brave person that will regard the following as anything but educated guesswork, however in our defense – our batting average in terms of predictions has been better than most. For example, here’s a snapshot of some previous predictions we referred to in May 2020 after Covid had landed in NZ:

• Property Managers predicting rent arrears predicted to rise to 15 to 20%. We didn’t agree!
• Rental over supply in the likes of Queenstown resulting in a drop in rents. Proved correct.      
• Rents could shrink back 5% to 10% on the back of an oversupply (the likes of Airbnb properties coming into the longer-term rental market) and unemployment.  We were wrong, but not as wrong as most!
• House prices to drop by 10% to 15%.  We didn’t agree. We thought prices could come back by about 5% but that it would be short-lived.  So once again we were wrong but not as wrong as a lot of commentators. 

House prices. The increases we have seen over the last 12 months are unsustainable.  We believe that 2022 will see house prices level off in most locations around NZ.  Some areas may even see prices drop below present levels, but any fall should hopefully be minimal.  We don’t foresee a crash in the housing market. 

Rents. Steady as she goes. As we have previously reported the market dictates rent levels and there will continue to be a rental shortage through all of 2022 so rents will definitely not come back and small to medium increases will still ensue. The bottom line is that there just aren’t enough rental properties in NZ.     

Office of the Privacy Commissioner (OPC) releases guidelines for Landlords and tenants

Some of you may recall a Property Manager who appeared before a Parliamentary select committee and admitted requiring bank statements from potential tenants.  That practice was bad enough but the Property Manager in question went on to say that she often saw expenditure like KFC that the tenants couldn’t afford.  It’s pretty hard to find anything right in that and after being widely reported it unsurprisingly resulted in the Privacy Commissioner jumping into the fray.  Generally speaking, having someone like the OPC conducting an investigation into how we as an industry perform in terms of protecting the rights of people’s privacy might be a cause for concern.  But hold up.  I was fortunate to hear a presentation from the Privacy Commissioner (John Edwards) at a property management conference a couple of years ago (those conferences aren’t all drinking and dancing) and I have to say I was impressed.  So, I wasn’t overly concerned about the outcome of any investigation and subsequent recommendations, except that as an industry we would probably be let down by the odd rouge Property Manager.  The results are now out and as well as tenants and prospective tenants being able to anonymously report privacy concerns to the OPC they now have the power to take the following action against non-compliant Property Managers:

• Warning letters
• Access Directions
• Compliance notices
• Public interest inquiry
• Public naming of an agency
• Referral to the Human Rights Review Tribunal
• Fines of up to $10,000 for failing to comply with a Compliance Notice

So, what are we allowed to ask for and when?  If a potential tenant enquires about viewing a rental property, then they can be asked their name and contact details.  Once they have viewed the property and completed an application the following information can be requested:

• Name and contact information
• Proof of identity
• Whether the applicant is aged 18 years or older
• Number of people who would live at the property
• Names only of occupants who will not be on the tenancy agreement (e.g. flatmates, dependents), but not other personal details about non-tenants
• Contact details for landlord and non-landlord references
• Consent for a credit report and criminal record check (to be obtained only if you are in negotiation with a tenant about an offer of tenancy)
• Pet ownership
• Whether any occupants are smokers
• Whether the tenant has a legal right to remain in New Zealand for the duration of a tenancy (only if the tenancy is for a fixed term)

Once this has been obtained, the landlord or property manager will make a shortlist of preferred candidates. This is likely to be no more than two or three applicants, at which point the Property Manager will be entitled to carry out the background checks such as references, credit checks, and proof of income.

There’s nothing contentious in the guidelines released by the OPC.  I hate to think what the investigation cost was, but Mr Edwards could have saved his office some serious $$ if he’d just requested the Propertyscouts tenant process from our operations manual.  It’s nice to know that every now and then we’re on the same planet as a Government Department. 

Insurance

It’s no secret the price of building in NZ is increasing so if you haven’t updated your house insurance policy in the last year or so then now might be as good a time as any.  It’s hard to get a good accurate gauge on how much building costs are increasing year on year at present but somewhere between 4% to 5% would be ballpark so if you haven’t reviewed your replacement insurance for at least the last 12 months you could be as much as 5% underinsured.    

Kāinga Ora sustainable tenancy policy

Across the whole of NZ Propertyscouts manage 1000’s of rental properties but the number of properties we manage is just a drop in the bucket when compared to the 60,000 that Kāinga Ora manage.  Imagine our surprise then when it was revealed recently that Kāinga Ora hadn’t evicted any tenants since 2018!  We’ve previously written about the one rule for them and another (more onerous) for us when it came to compliance with the Healthy Homes legislation, but we won’t dwell on that.  We can’t imagine how hard it is dealing with some of Kāinga Ora’s tenants but there are a number of private Kiwi homeowners living next door or close to Kāinga Ora properties whose lives are hell because of Kāinga Ora’s ‘sustaining tenancies’ policy.  Imagine living next door to gang members and the resulting anti-social behaviour, or machete welding alcoholics.  We don’t profess to know what the answer is because for a lot of Kāinga Ora tenants there aren’t a lot of options beyond a Kāinga Ora tenancy but surely such a tenancy is a privilege, not a right and the rights of decent hard working Kiwis who happen to end up living beside some of these problem tenancies need to be respected instead of, in some of the worst examples, forced into having to sell their homes and move out of the area.   It was recently reported that Kāinga Ora has been ordered to pay compensation to several neighbours of unruly state housing tenants, over its failure as a landlord to ensure its tenants aren't interfering with their neighbours' right to peace and quiet. In at least one case, the Tenancy Tribunal warned Kāinga Ora its refusal to terminate tenancies was in breach of the Residential Tenancies Act and "cannot continue".   

Is your rental a boarding house?

If you own a rental property where six or more people share the accommodation by renting a room or sleeping area within a room and the tenants share facilities such as the kitchen, bathroom or laundry you could be operating what’s considered a boarding house under the Residential Tenancies Act 1986.  Properties considered to be boarding houses share many of the same requirements as a standard rental, but there are some differences:

• There are no fixed-term tenancies in a boarding house – agreements are intended to last 28 days or more.
• Tenants only have to give 48 hours’ notice to end the tenancy. 
• If the bond is equal to one week's rent or less, it doesn’t have to be lodged with Tenancy Services.
• The landlord must give 28 days’ written notice before increasing the rent.
• Tenants must have access to their room, and toilet and bathroom facilities, at all times.
• Landlords must keep the shared facilities in a reasonable state of cleanliness.
• Tenants’ rooms must be reasonably clean and tidy and must not create a health or safety hazard.
• The landlord can enter the boarding house at any time, but they must give 24 hours' notice to enter a tenant's room (except in specific circumstances).

In a nutshell if the tenancy is for 28 days or longer, there are 6 or more tenants in the property and they share facilities such as the kitchen, bathroom and general living areas and they have an agreement to rent a room rather than an agreement to rent the whole property – it’s likely that you’re operating a boarding house. 

Media continues biased reporting on investors shutting out private home buyers

I shouldn’t be surprised but I was still astonished by a recent Stuff article titled - Mega Landlords: New parents sell home, instantly priced out of moving up the ladder.  The article went on to talk about a West Auckland couple (he’s a mortgage broker) who had sold their smaller house in the hope of buying a bigger one but found they were priced out of being able to buy a bigger house and had now reverted to buying a smaller house than the one they had just sold, apparently for a record price!  Yes, it’s easy to feel sorry for people unable to afford to buy the type and size of house they want, but where’s the story here?  Someone can’t afford to buy the house they want. In the article it’s claimed that nearly two fifths of properties in Auckland are owned by investors and the home owner is quoted as saying ”We are stuck with what we’ve sold our house for, and then in the last two or three weeks we’ve seen house prices jump another $100,000.”  Where’s the proof and accuracy of these comments?  House prices have certainly been on the rise but a hundred grand in two to three weeks!  And nowhere in the whole article is there any justification for the headline reference to ‘mega landlords’ when statistics show that in NZ nearly 80% of landlords only own one rental property.  If you’re up to some cringe worthy reading then here’s a link to the article:  https://www.stuff.co.nz/life-style/homed/housing-affordability/300451785/mega-landlords-new-parents-sell-home-instantly-priced-out-of-moving-up-ladder       

Rental property used as meth lab

We’ve heard it before and will again, the private landlord caught out by their property being used as a meth lab.  Of course, this isn’t just a private landlord problem – it hits Property Managers as well but we’d like to think that we have some processes in place to mitigate the risks as best we can.  First and foremost is the necessity to sample test between every tenancy.  Then there’s regular inspections and knowing what to look out for.  If at any stage, you are suspicious then test as soon as possible.  As a (very) general rule now unless the property has been used for manufacturing any meth contamination level of 15 micrograms per 100cm2, is deemed ‘acceptable’ with no adverse health effects.  In the latest contamination case, the Hamilton landlord had owned her property for about 15 years with few problems until the last tenant moved in.  The landlord received a phone call advising her that the property had been ‘busted’ by the police and clan lab material, methamphetamine and cash seized.  Three people were arrested, but not the tenant who claimed to have been staying at another address at the time the property was contaminated.  Since the bust, the house has been aggressively vandalised with spray-painted words like snitch and pig over the external walls.  The landlord described the experience as ‘devastating’ and we certainly feel her pain.  

Property Investor Insights care of Tony Alexander and Crockers

Key points from this months investor insights are: 

• Rising mortgage rates have yet to alter buying and selling intentions, and debt repayment is not being accelerated.
• More investors are looking to fix their interest rates for longer periods.
• One-quarter of investors planning a purchase will develop a property(s) themselves. 

Cut and paste the following link into your browser for the full report: https://www.crockers.co.nz/media/64556/crockers-tony-alexander-investor-insight-november-2021.pdf

Last Landlord newsletter of 2021

Like a lot of us, you’re probably looking forward to seeing the back end of 2021.  It’s been an extremely difficult and challenging year for us all and we take our hats off to the Aucklanders who have done the ‘hard yards’ over the last 3 months.  As property investors, we can take some comfort from how well the overall property market has fared over the last 12 to 18 months.  Covid will continue to challenge us all in the months ahead but provided we “keep calm and carry on renting” we should be right.  From all of us to all of you, have a very safe and enjoyable (border-free) Xmas and New Year.  Rest assured while you’re on holiday we’ll be doing what we do best – looking after your rental property and your tenants.       

Disclaimer

The Propertyscouts newsletter is prepared each month by Milton and Ryan who are the owners of Propertyscouts NZ.  Milton is based in Christchurch and Ryan is based in Auckland and between them they support the 16 Propertyscouts offices operating around NZ.  The newsletter goes out to 1000’s of NZ property investors each month.  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.  We suggest that in all cases independent legal and financial advice is sought.