Big rent rises ‘grim for tenants’

Auckland leads the way with median figure of $480 a week, up 6.7 per cent.

NZ Herald  Feb 21, 2015
by Anne Gibson

WeRent note: As we saw on the ground last month, the big catch-up for landlords is finally happening. Whew… it’s really about time! 

National rents have risen 9 per cent in the past 12 months, the biggest increase recorded in five years and “grim news for tenants”.

Nigel Jeffries, head of Trade Me Property, has just released the data for the year to January showing the median weekly rent is $420.

“The 9 per cent year-on-year increase in January is the largest single-month rise we’ve recorded over the past five years.

“Median weekly rents clicked up $20 per week between December and January to a record high of $420 per week. That’s grim news for tenants,” Mr Jeffries said.

Areas which recorded some of the big rises in the year to January were Auckland up 6.7 per cent to $480/week, Wellington up 6 per cent to $440/week and Canterbury up 8.4 per cent to $450/week.

Figures from property management company Crockers, also out yesterday, showed price jumps for weekly rent in three-bedroom homes for all 30 Auckland suburbs.

Barfoot and Thompson director Kiri Barfoot said the agency’s data showed a 26 per cent increase in Auckland rent over five years, from $388/week in 2009 to $488/week in 2014.

“In the same period a litre of 91 octane petrol has increased by 32 per cent, while a 400ml glass of beer and an adult visit to the doctor have both increased by 22 per cent,” she said.

“With the average Auckland house price increasing by 38 per cent in the same period, it means that tenants are not paying over the top in terms of weekly rentals, and that landlords are not recovering in full the current purchase price of properties.”

Auckland’s apartment market represents more than 60 per cent of New Zealand’s apartment stock and the weekly Auckland apartment rents rose by $10 to a new high of $430/week, up 7.5 per cent on a year ago.

Mr Jeffries said the rental market is responding to pressure from landlords trying to recover more money after big house price rises.

“It was more a question of when – not if – landlords were going to start recovering some level of yield. It looks like that signal has flowed into the market this month and started to sting tenants in the pocket,” he said.

Nationally, rents on three- and four-bedroom properties were up 9.5 per cent to $460/week.

Hopefuls cram open homes in central Auckland

Hordes of returning students among those flocking to view well-priced inner-city rentals

NZ Herald  Jan 14, 2015
by Teuila Fuatai

WeRent note: We are seeing large rises in demand and in rents this Jan/Feb. Particularly for 3+ bedroom houses in Central and North Shore suburbs. Expect a surge in rental prices this year as happened in early 2010.

Well-priced central Auckland rentals are attracting dozens of prospective tenants to open homes, with many people queuing to see a vacant property, a real estate company says.

Joe Schellack, general manager at Crockers Property Management, said up to 40 people were showing up to viewing sessions for some rental properties in the central city and city fringe areas.

“The prospective renters are from all walks of life and all nationalities, but students and working holiday visitors are certainly back in force for the central city areas,” Mr Schellack said.

Two and three-bedroom places priced between $300 and $500 per week were in hot demand.

“If priced correctly, most properties get applications at the first viewing. [They are being rented] about three to four days after being listed,” he said.

“Two to three-bedrooms are in demand, as students or groups are able to split the rent between them.”

The Herald visited several open homes in Auckland on Monday.

A four-bedroom flat on Burnley Terrace, which attracted more than 30 people, had a crowd of eager young students lining up to view it.

Another four-bedroom place on Clarence St in Ponsonby also had a steady stream of keen renters.

Surveyor Sam Wells, 22, was among the hopefuls. He and his three friends have looked at about four places in the last fortnight.

“Everything we’ve been to, it’s been the whole open viewing, short sessions – so they’re always packed,” Mr Wells said. “We haven’t heard back from anyone yet because it’s all been in the early stages for all of them.”

The group have a budget of about $880.

While good references and being “first to the party” was important, standing out against the masses of keen renters was probably the main obstacle, he said.

“I think this one turned up on Trade Me [on Sunday] and just in the last five minutes, there’s been 20-odd people through it.”

Tenants have already been warned to plan for a rise in rent this year as demand increases.

Barfoot and Thompson director Kiri Barfoot and David Whitburn, immediate past president of the Auckland Investors Association, said Auckland rents rose 4.6 per cent in the year to November 30 – up an average $21 a week across all suburbs and categories. A similar increase was expected this year, they said.

Landlords ‘too lenient’ when tenants go off rails

5:00 AM Tuesday Jun 10, 2014
By Nikki Preston NZ Herald

Landlords are too lenient when a tenant falls behind in rent or causes damage, property managers say.

Of the 39,808 claims lodged with the Tenancy Tribunal between July 13 and May 2014, 74 per cent were for rent arrears and 6 per cent were for damage.

Real Estate Institute of New Zealand property management group chairman David Faulkner said landlords needed to put in an application to the Tenancy Tribunal as soon as the tenant starting slipping behind in rent. A tenant is given 14 days to resolve a breach of the tenancy agreement before an application could be heard. The applicants could either first go to mediation or a hearing date – an average of 22.5 days after the application was made – would be set at the court.

“A private landlord would probably try and resolve the situation face to face whereas a property manager would say ‘right if you haven’t paid by this date, we will make an application’.”

Barfoot and Thompson director Kiri Barfoot, whose firm manages Auckland residential properties, said the problems could often be avoided altogether through correct screening and putting the right tenant in the property in the first place.

“Private landlords often go, ‘the tenants are really nice so I won’t follow the procedure or [I'll] let them get away with it’ and the tenant realises that and takes advantage.”

Landlords who were going to manage their own properties needed to carry out the credit checks, call references and carry out their own research on prospective tenants.

Harcourts Monarch Realty Limited general manager Melanie Yeoman said private landlords tended to forget about doing regular inspections or carrying out the right checks.

“You can tell a tenant is going Awol far before they trash a house normally.” She also said landlords interviewing prospective tenants should go with their gut feeling and also do a credit check via the Tenancy Information New Zealand website.

America-based property investor Wayne Frederick said in the 20 years he had rented out properties he had never had a problem with bad tenants and put it down to doing vigilant background searches including checking court records and Facebook for tell-tale signs. “Owners need to watch and take care of their property. Treat tenants right and screen their tenants. If the prospective tenant has had one problem don’t rent to them.”

A landlord

Simon Standing’s dream of having an investment property to fund his retirement turned into a nightmare when the tenant wrecked the property and shot at a wall with a slug gun, leaving dents all over it.

The Whangarei father-of-two had to pay $12,000 to fix the damage, which included repainting the property from the ceiling down after the tenant vacated last year.

The three-bedroom property with a garage rented for $340 per week and had only been recently redecorated before Mr Standing’s family moved out and the tenant moved in a year earlier.

The Tenancy Tribunal awarded him $3750 in damages and to keep the bond of $1350, which almost covered the $1600 in rent arrears after the tenants stopped paying rent when they handed in their notice.

A renter

Solo-father Tony Westmoreland has to wait for months to get anything fixed in his two-bedroom rental and says the lawns have been mown once in the past year.

However, the Auckland product developer said the property management firm did not mess around when it came to putting up the rent on his tiny unit in Panmure, which has gone up $10 to $400 a week after one year of living there.

The 53-year-old, who has rented for six years, said he also had very little say and was expected to succumb to the property manager’s demands.

His property was broken into last year leaving the windows at the back of the house smashed. He said the agency would reimburse him only after he had paid for the damage to be fixed and provided a police report.

Horror tenants frustrate landlord

5:00 AM Monday Jun 9, 2014
by Natalie Akoorie NZ Herald

A landlord whose property was left in squalor by a tenant owing more than $6000 rent and another who caused $28,000 damage, says owning rental properties is fraught with difficulties.

And she’s not alone. Many landlords give up and sell their properties because of bad experiences, according to the New Zealand Property Investors’ Federation.

Di Maxwell, a Far North District councillor, was dismayed to find dirty nappies, used condoms, rats eating rotting rubbish, and general “filth” in her three-bedroom Haruru Falls rental near Paihia.

She said she’d been having problems with the tenant for nearly a year. After numerous warnings, requests for damage in the house to be repaired and complaints from neighbours about rats, she gave the tenant an eviction notice. However, with 42 days to leave, the tennant then stopped paying her rent and water – both already overdue.

That left nearly $6000 in outstanding bills and around $9000 worth of damage – from ruined carpet to a kitchen where the doors were left hanging off their hinges.

A tenancy tribunal hearing has resulted in an order for the tenant to pay the money but Ms Maxwell is now having to go through Winz to get the weekly payments of around $25.

It’s the second time Ms Maxwell and her husband have had to evict a tenant from a property.

“Both of them have just been pigs,” Ms Maxwell said. The first eviction several years ago from a cottage on the same property cost the couple $28,000 when the tenant trashed the house, ripping off kitchen cupboards, allowing a flooded washing machine to rot floorboards and leaving trailer loads of junk behind including old mattresses, clothing and appliances.

They had to replace carpet, the kitchen stove and the rotten floor, and took the woman to the Tenancy Tribunal where she was ordered to pay $12,000, at $25 a week.

The couple have owned the property for about eight years and Ms Maxwell said though “not flash” the houses, rented for a total $500 a week, were sound residences.

She said she was sick of landlords getting a bad rap. “People seem to think landlords are raking in the money for little work, and are making money from ‘poor’ people who can’t afford homes.

“This place is not even covering costs, but we live in hope that it might be a reasonable retirement income for us one day.”

New Zealand Property Investors’ Federation executive officer Andrew King said it was heartbreaking for landlords when their properties were maliciously damaged.

“It is really soul-destroying when you rent out a place and you put a bit of pride into it and people just trash it,” Mr King said.

“Most people that I meet who sell up do so because … they’ve had a gutsful.”

About 45,000 applications are made to the Tenancy Tribunal every year, of which 90 per cent are from landlords.

Of those the most common complaint is unpaid rent, while damage to the property is the second-most common problem.

Barfoot & Thompson director Kiri Barfoot said terrible tenants often came with warning signs.

“If people need something yesterday, why? Have they been evicted from a previous tenancy?”

There were other ways to penalise bad tenants, including reporting the case to credit controllers and with the publication of the Tenancy Tribunal order against them.

The lay of the landlord

• 32% of New Zealand’s 1.5 million homes are rentals.

• Rents are relatively low in New Zealand compared to other countries.

• A study by the NZPIF on the cost of renting versus owning a home shows it is $158 a week cheaper to rent the average Kiwi home than to own it.

Tips for landlords

• Carefully select and fully vet tenants first, including qualified references and credit checks.

• Take out special landlord insurance.

• Make regular inspections and keep written records.

• Issue a 14-day notice for a tenant to fix damage, clean up, stop loud noise, or pay rent arrears.

• Issue a 90-day notice of termination of the tenancy.

• Make application to the Tenancy Tribunal for eviction.

• Employ a property management company.


Fed up landlord sells up properties

By Natalie Dixon
Bay of Plenty Times

A Tauranga landlord, fed up with dealing with “dodgy tenants”, is selling up his rental properties and putting his money into the sharemarket.

Earlier this month, the Bay of Plenty Times reported Trade Me figures showed the supply of available rental properties dropped by 18 per cent to 2465 listings in the October-December quarter.

However, demand for rentals ballooned by 17 per cent for the same period and the average weekly rent jumped by 18 per cent to $405.

Property managers said they had dozens of people calling them every week looking for a rental property, with many being rented out without being advertised.

The rental shortage was attributed to the city’s rapid growth as well as the Reserve Bank’s restriction on loan-to-value ratio (LVR) lending, which had forced many potential first-home buyers to continue renting.

However, Tauranga landlord Daniel Sycamore said property investors were choosing to leave their properties empty or put them on the market.

Mr Sycamore said he had put two of his properties on the market this year after a string of bad tenants who trashed his rentals and failed to pay thousands of dollars’ worth of rent.

He told the Bay of Plenty Times he would rather invest his money in the sharemarket than risk renting them out again.

“I have rentals in Rotorua and I have never had any problems, but Tauranga is different for some reason,” he said.

“I have just had a string of dodgy tenants who have cost me thousands and, for me, it is just not worth it anymore. I would rather invest in the sharemarket where I can make a profit without the hassle. It’s not just me, I know a lot of former property investors who do not see the point anymore.

“You would have to be crazy to have rentals in this town.

“It’s sad because I know there are some great tenants out there but the ones I get just don’t seem to know how to look after someone else’s property. There is no respect.” Papamoa property investor David King has also put two of his rentals on the market this year.

“I have had people smash holes in the walls, steal curtains, all kinds of things. The cost is too much to bear anymore. The problem is the bonds do not cover the damage and when you try to work things out you have to go to the Tenancy Tribunal and they are swayed toward the tenant for some reason.”

“You can never get your money back and if you do it is drip fed, $10 a week.”

Mr Sycamore said the Government needed to look at changing the legislation so that landlords could get proper reparation from tenants.

“At the moment, landlords can be fined for all kinds of things but tenants cannot. All we can do is try to get the money back to cover the cost of damage they have made.

“They have all the power, it is not worth it and until it is even, the rental shortage in the Bay will get worse because people do not want to take the risk anymore.

“These dodgy tenants will have to bite the bullet and save up and buy their own homes. If they want to smash holes in their walls that is up to them, but they will not be doing it to me anymore.”

Auckland Vacancy Levels Continue High

WeRent note: We recommend that you bookmark
This excellent blog will give you hard information as to the state of the property market, and its rental statistics are a good guideline as to the state of the letting market. Below you can see that an increase in investor purchases has increased Auckland rental supply and kept a lid on prices and increased vacancy levels over the past year.

Auckland rental market continues to trundle along with an excess of supply over demand.   Other commentators have hinted there may be a lot of speculative investor activity driving the market, these stats certainly provide support for that thesis.  The opposite is true in Wellington, where vacancies are trundling along at a squeak under normal seasonal levels.

The chart below shows seasonal vacancy levels compared to the average of the last 4 years.  2009 was just after the global slump and had exceptionally high vacancy levels.  For the last 3 years listings fell to a very tight level in 2011 when we heard of queues for rentals to last year with 10% above the average.   From the beginning of this year however, listings grew to over 20% higher than historical levels.

The sharp variations are due to the averaging process, when I get time I will improve the methodology.  At present it is a simple average of the 4 days before and after the specific date, over the previous 4 years – 2009 – 2012

AK Urban2

With this many vacancies in Auckland, investors are in for a shock if there place is not better than others.  A correction has to be not far away, new investors will not be able to hold out with long vacancy waits.

Wellington market is sitting at almost normal levels after dropping from an unexpected high over last summer.  Note that this chart shows the difference from normal seasonal levels, so 40% above normal in summer is an exceptionally high number because summer listings are higher than winter.  On 9th January, listings in Wellington totalled 2269, the average for the previous 4 years at this time was1533, showing increasing vacancies every summer over the five years.

Reserve Bank could target investors

Macroprudential tools could be used to target residential property investors, the Reserve Bank says in its latest Bulletin.

Lamorna Rogers writes that the Reserve Bank is improving its capacity for targeted interventions.

“New data collections are being put in place which will provide breakdowns of housing lending by categories such as investors, first-home buyers and businesses.”

She said that sectoral capital requirements or loan-to-value restrictions could be used specifically on “problem sectors”, such as investors.

“The decision to restrict banks’ high-LVR housing lending reflects heightened concerns about the rate at which house prices are increasing and the potential risks this poses to the financial system and the broader economy. Rapidly increasing house prices increase the likelihood and the potential impact of a significant fall in house prices at some point in the future.”

She said the Reserve Bank was aware that some banks might create products with the aim of getting around next month’s speed limits and it was talking to them about what might be deemed “avoidance”. “[It] expects bank senior management and bank boards to respect the spirit and intent of the LVR restrictions.”

Macroprudential tools were not a “set and forget” thing, she said. The bank would be continually monitoring their effect.

The Reserve Bank’s taking some sound and pragmatic steps….

WeRent note: Below is an excerpt from this article about Reserve Bank policy changes which could flow on to have major consequences for investors with large portfolios. I recommend you read the full article if you have 5 or more dwellings.

By David Hargreaves

Credit due

But, credit where it is due, a lot of the latest proposals look like good commonsense ‘belts and braces’ measures that will force the banks to be prudent.

Now, banks will always say they are prudent. But history suggests they can and do get carried away at times of asset bubbles.

The key points in the consultation paper are contained in this article by Gareth Vaughan, so I won’t reiterate them in detail. What I will do is add some hopefully constructive views on the main issues, which I subjectively identify to be:

  • A proposal that the big four banks are treated the same way as the smaller banks in that all credit – including personal loans and credit cards – that is secured against a house, be included in the LVR calculations.
  • The move that all banks be treated the same, in that they will all be required, as opposed to just presumed, to have a property valuation policy and that this policy is not affected by market conditions.
  • That the banks provide details on how they account for such situations as borrowers with more than one property secured, or indeed where there are multiple borrowers with multiple properties.
  • That mortgages where the borrower owns more than four residential properties are treated as commercial loans, and likewise in some circumstances borrowing on lifestyle blocks may also be treated as commercial loans. This would make a substantial difference in the “risk weighting” given to the loans.

I like the information gathering that is implied by particularly the third point. It will indeed be most useful for the RBNZ to not only know how banks account for such lending, but how many loans are affected.

There may well be considerable work involved at bank level in giving this information, but it should be worth it.

Why not before?

Hindsight is a splendid thing, but you do wonder why such information has not been gathered before. Although, I suppose the RBNZ might argue that it is now gathering this information in order to apply a new policy – IE the LVR limits – and previously it might have been seen as a waste of taxpayers’ money if the information was not seen as serving a specific purpose.

But for me, I think the more information we have on the inside of the NZ housing market the better.

A lot of the talk on the heated Auckland market focuses around the shortage of supply – but there is no really good information on just who is buying, why and how they finance their purchases. Better understanding of what makes the house market tick is vital.

In the same vein it will also be very useful for the RBNZ to be gathering information on how many people are property investors and how many properties people are owning.

Abundant sense

To me it makes abundant sense that anybody owning as many as five houses is in fact a professional investor and therefore should have their loan or loans treated as commercial loans. That should have two significant impacts.

First, of course the different tagging of the loan makes a huge difference to the “risk weighting” applied to the loan as an asset and therefore implicitly on how much capital the banks need to hold. At the moment the “risk weighting” given to the big banks on mortgages is only about 33% and around 38% for other banks such as Kiwibank.

With commercial loans of course, 100% of the loan is included in banks’ capital adequacy ratios. So, quite a difference.

The second point is, what will the re-tagging of the loans as commercial from residential mortgages do to the cost of funding for investors? Potentially, quite a lot, you would have thought.

Unintended consequences

Of course, it is to be presumed if this change goes ahead that we can expect to see the wives (in their own names) and children (in their own names) and cousins etc of people who own five or more houses suddenly taking ownership of properties. So, this is one area in which there may be those dreaded unintended consequences. Whether the RBNZ has some grand plan to avoid that, time will tell.


Mild winter heats up Auckland rents

WeRent note: We haven’t seen too much in the way of rent increases over the past 3 months. Vacancies have also lengthened during winter this year, much more than last year.

By Alanah Erikse
NZ Herald

An unseasonably warm winter is being cited as the reason for a boom in the Auckland rental market that has pushed weekly prices for three-bedroom home up in 25 out of 30 suburbs.

Some families are so stretched they are looking at bigger houses to share with other families, accepting properties in poor condition or even considering moving out of town.

Renters in the city are paying up to $60 a week more than they were at the beginning of the year, according to figures from property management company Crockers.

Real Estate Institute chief executive Helen O’Sullivan said house hunters were vying for top properties within good school zones and close to the city.

“Things are generally quiet during winter, but the weather has been so mild that there is a lot more mobility.”

Crockers has analysed the average of six-month rolling median prices of new bonds received each month – supplied by the Real Estate Institute of New Zealand and the Department of Building and Housing – for one, two, three and four-bedroom homes.

 In March, the Herald reported that the cost of renting a three-bedroom home in central Auckland suburbs was levelling or falling while rents had gone up in nearly all suburbs in Manukau City and on the North Shore.

But the city rents are picking up again with sharp annual rises in some places like Remuera, which has jumped from $623 to $676, or 9 per cent, since June last year.

East Coast Bays and Te Atatu jumped by 8 per cent and 7 per cent.

The Ponsonby, St Mary’s Bay and Herne Bay area remained the most expensive area at $760 a week, an increase of 5 per cent. It was followed by Remuera ($676) and Grey Lynn/Westmere ($671).

The cheapest areas were Pukekohe ($360), Papakura ($369), and Manukau/Manurewa ($383).

Rents fell in only four areas – City Bays (Mission Bay to St Heliers), Devonport, Pt Chevalier/Mt Albert and Mt Eden (Kingsland, Balmoral). But the areas still had average rents at the high end of the scale for the city.

Rent stayed at $627 in the city centre, which included the suburbs of Parnell, Grafton and Newton.

Lisa Loader, of South Star Rentals, which has worked with Housing New Zealand to house people in South Auckland, said people were looking at properties that had another dwelling on it or an extra room they could rent out so they could share the costs.

“We’re getting a lot more people now that just simply can’t afford to be looking at a house on their own. Your average person that has a couple of children … just can’t afford to rent a house that is suitable for their family. So they’ve looking at something bigger and perhaps sharing with another family, which is quite difficult because a lot of landlords will say, ‘We don’t want two families in the house because of the wear and tear.”‘

She said Work and Income beneficiaries did not appear to be moving as much because it was “too frightening for them to leave the place that they’re at and try and get more money to pay the extra rent”.