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How To Adapt To A Slowing Rental Market

With landlords now competing for a smaller pool of tenants there is a greater emphasis on quality of product and marketing, writes David Faulkner.

By: David Faulkner

31 August 2022

It may have come as a bit of surprise to read headlines saying the rental market has swung in favour of tenants. There are many reasons why this has been the case, the main one being that we have seen more properties enter the rental market as vendors who would typically have sold have moved these properties into the pool.

There are other factors at play, including 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 has come to an inevitable stop.

We’re also witnessing a brain drain as many young people head overseas to do their OE and seek better opportunities while immigration hasn’t even come close to hitting pre-pandemic levels. Most people leaving New Zealand will likely be renting, and as they leave the rental pool they’re not being replaced. In the last two years we’ve seen double-digit rental growth in most regions, but we don’t 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 advertising, could be well below par, although with demand for rental stock being high, landlords could get away with it. Things have now changed, and this isn’t a bad thing. With landlords now competing for a smaller pool of tenants there is a greater emphasis on quality of product and marketing.

‘Think about your target market. Ask yourself whether you would be prepared to live in the property’

Professional Help

There also appears to be a greater emphasis on who is managing the property. Research by New Zealandbased prop-tech company Renti highlights that most prospective tenants will search and apply for properties that professional property management companies manage rather than privately managed. Their software helps process tenant applications for rental properties. For all tenants who applied for a property using their software in June, 81.1 per cent completed a tenancy application for professional listings; only 38.2 per cent 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 was a landlord looking for a tenant in this market I would be placing considerable emphasis on ensuring my property is well maintained, warm, dry and Healthy Homes compliant. I would 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 walk-through 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 your property is immaculate and look to rectify any defects that may hamper the property 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.

Finally, if you don’t 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.

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