5 big investor questions, answered.
November 17, 2017 at 12:11 PM
The 5 most common investor questions we’ve been asked this month.
Is the rental stock depleted in Auckland?
That’s not what we are seeing. In our experience, a few investors are leaving the Auckland Rental Market, but the reasons are personal (not based on political or market changes). What we are seeing is Kiwi’s living abroad rushing to secure rental properties before restrictions are placed on international buyers. Most people are taking a ‘wait and see approach’ on the housing and tax changes. A knee jerk reaction isn’t common for seasoned investors who have ‘been there and done that’ before.
And what’s happening with the rental market in Auckland?
At this time of year, it’s common for the rental market to slow as people bed in for the Christmas Holidays. This didn’t happen last year and we remained busy from September till the end of March. At the moment, Auckland properties are taking longer to rent and rental reductions have been required in some areas to meet the market and secure quality tenants. Quality city fringe properties with good kitchens and bathrooms remain popular. There is certainly a growing trend as increasing numbers of our tenants are moving further out of central Auckland in search of more space and saving on rents.
Is it getting more expensive to rent in Auckland?
Possibly! Although the average market rent is rising statistically (see this recent Herald Article), we’ve notice a trend of owners who are simply bringing their rents in line with market rents (rather than offering considerable discounts to long standing tenants). But properties that were priced well in the area (to begin with) are not increasing drastically (not increasing above the CPI). So this could be more a case of the late majority catching up to what has already been happening in the Auckland rental market.
What will happen to owner fees if tenants don’t have to pay a letting fee anymore?
The simple answer is this will be passed to the owners, who will in turn increase their rents. This has been widely discussed already. Where we think real change will be seen is in the service surrounding renting the property. If the agency doesn’t charge the owner anything for securing a new tenant, they will lose significant income. When an agency loses income, they cut staffing. When staffing is cut, service suffers. For many agency business owners, this represents an excellent opportunity to buck the trend, keep the service levels high (for both owners and tenants) and ultimately win more market share. We saw this previously at the tail end of the global financial crisis, when agencies were not making as much in both sales and rentals. Staffing levels were cut and service levels fell. Many agencies grew dramatically at this time, as they invested in hiring good people and hunkered down to wait out the storm, picking up new managements from Auckland property owners who were frustrated with poor service levels.
What can we do with our land to create more housing in Auckland?
The Auckland Unitary Plan has had far reaching changes to what we can do with our Auckland properties. Many investors have been asking us about building and developing. It’s a big topic and not our core area of expertise. So we went and found someone who knew all about it. Sunny from Avant Planning is one of those such people and he will be sharing answers to many questions our owners have about their properties and their potential in future posts. If you have a question now though, email firstname.lastname@example.org and we'll help!
Once you know what you can do with the land (and what it will cost) you then play the waiting game, as Auckland builders can simply not cope with the demand. This has led to an increase in building costs (as have raw materials) and for Property Management companies like us, it’s meant that finding good builders to do repair and maintenance work (typically not as lucrative as new builds) is difficult.
These barriers to development (and banks lending) will need to be removed/improved before we can see real progress made with the housing crisis.
Till next month,