Statistics show how much our government relies on private landlords to provide rental accommodation with a current level of around 85% of rental homes privately owned. The Government has introduced significant residential tenancy legislative changes favouring tenants and alienating landlords over the last few years. While it may 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. Worse still this Government is using private investors as a means to prop up their tax coffers which comes at the expense of the end users.
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, so as good citizens we must show due diligence. If the costs escalate, we have no option but to ensure the rent is managed well. In these times new investors are not being attracted to second hand homes, so the supply starts to constrict which in a fair marketplace increases prices. In most cases keeping good tenants comes well before raising rents, but survival in the business must always come first.
On top of the RTA changes, the Reserve Bank have made a succession of major OCR decisions over the last few years which are escalating through the housing market this year as mortgages come off fixed interest rates. Banks are under tight controls also to enforce interest and principal payments. It’s no surprise we are heading into a perfect storm for those sailing close to the leveraging winds. After all, most landlords are kiwi mums and dads who own one or two properties, and who are trying 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 its tenants that suffer as well. What happens when the economic activity which was encouraged by previous Governments is actively discouraged? Investors are forced to act to defend themselves, their finances, mental health and their future. For most mortgaged owners there is no option but to increase rents or sell. The result of Government policy flows through to the end users. Whether a tenant or a home buyer they will ultimately pay, making housing less affordable.
What happens when there is a shortage of homes to rent? Should the Government be building more homes to be rentals due to lack of supply? Or should we have a democratic housing marketplace? With the population increasing, rising investor activity is needed to assist with New Zealand’s limited rental market supply, advancements to the build-to-rent sector and more assistance from the government to help shift more tenants into home ownership.
Our Property Market is too important to fail. More investors translates to more rental stock, which eases demand levels in the rental market and helps overcome an overheating of rental prices. And most of all good stewards of tenants and smart investing makes our investments reap rewards. Be sure to get to your local Property Investor Association meetings this year and interact with this great network of investors.
Sue Harrison, NZPIF President