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The Impact Of Property Managers

Property managers now manage over 40 per cent of New Zealand’s rental stock.

By: Sally Lindsay

28 February 2023

New Zealand now has more property managers than it has drivers, cooks or architects, census data shows.

More than 40 per cent of tenancies are overseen by property managers on behalf of landlords and in the past year alone property managers lodged more than $162 million in bonds.

Common wisdom has it that renters pay more if they rent from a property manager, but is this true?

A Consumer NZ investigation set out to answer the question by asking the Housing and Urban Development (HUD) Ministry to compare the value of bonds lodged by property managers with those lodged byprivate landlords.

This approach isn’t perfect; there’s no single source of truth for who owns what property and how much they rent it for. The best data is from bonds lodged with Tenancy Services.

However, bonds aren’t lodged for all tenancies and because they’re only lodged at the start of a tenancy they don’t capture rent increases for
existing tenancies.

Also, bond lodgement forms are not designed to definitively capture whether there’s a property manager involved.

Those provisos aside, the results are significant, Consumer NZ says. Across the country, properties rented through a property manager are on average $7 more expensive per week than those rented by private landlords. Consumer NZ says part of the difference may be that property managers tend to rent higher-value properties, but that’s unlikely to account for the full difference, according to HUD.

Across price ranges, properties rented through a property manager are consistently more expensive than those rented through a landlord.

While correlation doesn’t mean causation, this data signals the property management industry may have an impact on rent prices. So what’s going on?

One explanation is that landlords effectively pass some of the cost of using a property manager on to tenants. In addition to various one-off fees and charges, property managers usually charge landlords a percentage of rent, typically between 6.5 and 10 per cent. That fee structure may also incentivise property managers to push landlords to raise rents as much as they can.

Residential Property Managers Association chairman David Pearse accepts there might be such an incentive, but says rents are ultimately a function of supply and demand.

A core part of the service property managers provide is ensuring landlords keep up with changes in market rent, and they do so by looking at the prices of other properties in the area.

But the market rent is shaped by the decisions landlords make on when they will raise rent and by how much.

Anecdotal stories suggest property managers may raise rent in circumstances where landlords would not otherwise do so.

As the property management industry grows, and more rent decisions are informed by the advice of property managers, the market rent may rise faster than it otherwise would. Renters United president Geordie Rogers says this shows a need for stronger rent controls. Right now landlords can only increase the rent once a year and tenants can challenge increases in the Tenancy Tribunal.

But these controls have little impact in keeping rents affordable, because in practice tenants will pay almost anything for a home, Rogers says.

There needs to be an indication of what is considered an ethical amount to charge someone for a house, he believes.


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