- Prediction that more landlords will turn to Property Managers but more companies will sell as compliance costs hit hard
- Regulation of the Property Management industry a necessity but will anyone listen?
As we return to work from our Christmas and New Year break, many of us will be wondering what will lie ahead for us in 2017. We have Donald Trump to look forward to (or not!!) plus its election year in New Zealand which will have added interest after John Key's shock resignation. But what will happen in Property Management and for tenants and landlords alike?
We have decided to look at the year ahead and give you our opinion on what will become some of the key talking points for the year ahead.
Baby Boomers Vacate As More Landlords Turn To Property Managers
We have been saying for some time now that the cost of being a landlord will continue to increase. Include the impact of the Osaki case and the fear of Meth-contaminated properties, many landlords have simply had enough. The Baby Boomer generation will continue to cash up their investments. Many of them take a DIY approach to property investment and would rather do it themselves than engage a Property Manager. The added pressures of compliance will be too much for many of them and they will either pass on their investments to future generations or they will sell.
With this, we will continue to see a shortage of rental properties available for tenants in most regions of New Zealand. This will see rents increase and yields improve, stimulating a younger investor to enter the residential investment market. The younger generation is more likely to accept that they need a professional to run their investments for them due to the increase in compliance. However, this client will also be more demanding expecting instant responses to queries, questions and requests. This may not be such as bad thing as they will be more focused on the quality of management rather than the fees being offered.
Verdict: A big year for the proactive professional Property Management company as they will grow. We predict more than 50% of properties will be managed by the end of the year.
There Will Be Fewer Property Management Companies
Again a symptom of added costs and compliance hitting business owners of smaller boutique companies. Since 2008, we have seen an explosion of literally hundreds of Property Management companies start up across New Zealand. The increase costs in running a small Property Management company will eat into the already tight profit margins, making it increasingly difficult to make money.
Companies that have made their sole point of difference cheap fees will suffer and some will take short cuts to survive. This will only get them so far as eventually, the risk of taking shortcuts will eventually bite many of them.
For many, they will simply burn out and throw the towel in, selling to the bigger operators who can easily absorb the rent roll without adding cost.
We will also see the Baby Boomer Principal sell their rent roll and disappear into the sunset.
Verdict: We believe we will see lots of smaller companies sell and the bigger players will start to dominate the marketplace. This doesn't mean an end to boutique Property Management, it will mean an end to cheap boutique Property Management.
Election Year Will Bring Tenant Fees Into the Firing Line
Recently we have witnessed the U.K. scrap letting fees with many experts predicting rents will increase as Estate Agents will have to pass on the costs to landlords. We will not be surprised to see this become a major talking point as the election comes closer.
The Greens have already proposed changes to this effect and we reported this in the Spring of 2016. However, this went largely unreported and as election approaches, expect a Labour-Greens coalition to campaign vigorously on anything to do with housing.
The impact of no tenant fees will have to be passed on to landlords in some way. The letting fee can make up anywhere between 10% to 20% of companies total revenue and with many Property Management companies struggling to make a substantial profit, this much-needed revenue will have to be recovered or else many companies will not make a profit.
Verdict: Expect 'Angry' Andrew Little to back the Greens bill. This will hit the headlines closer to the election. Majority of tenants will back this bill and we believe the Nats may foresee this and make the change.
Regulation of Property Managers Goes Nowhere
We simply believe that with it being Election year, there will be little appetite to change and no one is really attacking the Government aggressively enough with this. National do not appear to have any care in regards to regulating our industry and without a united voice, constantly campaigning for regulation, nothing will change.
This is a great shame. In our Great Property Management Survey well over 90% of people who completed the survey want to see the industry regulated. This would mean if you were to operate as a Property Management company you would have to follow strict criteria.
Unfortunately, it will take a number of shock horror stories like the 'So Called Self Claimed Property Manager' renting out garages to stimulate constructive debate. This only portrays our industry in a negative way and does nothing for our reputation.
Verdict: Disappointing I'm afraid. No one is prepared to really have a serious crack about this. Labour may make promises around this but one feels politicians will have more pressing matters to deal with.
Osaki Case Goes On the Back Burner
When Melissa Poole wrote to the then Housing Minister, Dr Nick Smith pleading for changes in legislation, it looked like progress was being made.
However, no one predicted John Key's shock resignation and this may have had negative implications for changes regarding the Osaki case. New Prime Minister Bill English made major changes to the Housing Portfolio.
With these changes, the impetuous for change may well have gone.
Verdict: Nothing to report here I'm afraid. We predict that Osaki will become the norm and we will have to just work with it.
Rents Will Continue To Rise Then Level Off
Back in May 2016, we wrote an article giving four reasons why rents would rise by as much as 10%. We look like we are going to be bang on the money. Rents will continue to head north as demand outweighs supply and added costs mean that landlords have to increase rents.
However, rents are primarily dictated to by people's capacity to pay rent and unless families net income increase, rents will over time level out. Also because of the election, we will see a natural slowdown of the housing market from winter through until late spring.
Verdict: No change to our prediction that we wrote about last year. The only thing we did not see was a shortage of rental stock.
We at Real iQ love our sport and in particular rugby. As I am an Ex-Pat from the U.K. I am really looking forward to the Lions tour in the winter.
I predict a tight series with the Lions having the edge in the forwards but not the class out wide in the backs. Ultimately the All Blacks will win enough ball to feed their back line and I am predicting a 2-1 series win to the All Blacks!
Bring it on!