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Surviving And Thriving

In a challenging election year investors should support NZPIF and make their voices heard, writes Sue Harrison.

By: Sue Harrison

31 January 2023

Statistics show how much our government relies heavily on private landlords to provide rental accommodation with currently around 85 per cent of rental homes being supplied by private-sector owners.

Over recent years various governments have introduced significant residential tenancy legislative changes favouring tenants and alienating landlords. While it may be politically convenient to portray landlords as a cause of many of our social problems, this has inevitably created an unpleasant “us versus them” culture between landlords and tenants.

Worse still is this government moving to use targeted levies on private investors as a means to prop up their tax take. Unfortunately this inevitably comes at the expense of the end users, our tenants.

BIGGEST EXPENSES

If we are smart enough to manage owning investment rentals, then we need to be smart enough to manage the expenses involved with that. Our biggest expenses are mortgage, tax, council rates, insurance premiums and repair costs. If these costs escalate, responsible owners have no option but to ensure these costs are covered.

Given these headwinds new investors are not being attracted to enter the rental home market, so the supply of rentals starts to shrink. In a free marketplace this leads to price increases. In most cases retaining good tenants comes before raising rents, but survival in any business venture, including this one, must always come first.

On top of the RTA changes, property investors are being affected by the successive major OCR decisions made by the Reserve Bank. These will be escalating through the housing market this year as mortgages come off fixed interest rates.

Banks are under tight controls to enforce interest and principal payments, so it’s no surprise we are heading into a perfect storm for those sailing close to the leveraging winds. After all, despite popular misconceptions most landlords are Kiwi mums and dads who own one or two properties, funded from their own resources to secure their financial future. These long-term property investors take on a commercial risk and should expect to receive adequate rewards for the
effort and stress involved.

HIGHER RENTS OR SELL

The real kicker is that if investors are hurting and reacting it is their tenants that also suffer. 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, their mental health and their future. For most mortgaged owners there is no option but either to increase rents or sell.

The result of government policy always and inevitably flows through to the end users. Whether a tenant or a home buyer the end user will ultimately pay, making housing less affordable.

What happens when there is a shortage of homes to rent? Should the government be building even more homes and increase supply at a mounting cost to the taxpayer? Or should we have a freely operating housing marketplace?

TOO IMPORTANT

With the population increasing what is needed is an increase in the level of private-sector investor activity to assist New Zealand’s limited rental market supply, advancements to the build-torent sector and more assistance from the government to help shift aspirational tenants across to home ownership.

Our property market is too important to fail. More investors translates into more rental stock, which eases demand levels in the rental market and helps deter an overheating of rental prices.

Most of all good stewards of tenants and smart investing makes our investments reap well deserved rewards. This is election year – support us to make your voice heard via our advocacy work with the political parties. Stay connected to your local property investor association, network with other investors, be informed and help make a difference.

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