Putting the breaks on the rental market

Posted by Jack Vale on February 15, 2018 1:30:49 PM NZDT
Find me on:

If we’re being honest, the newspapers are getting a little predictable lately. It would be rare for you to find a publication these days that doesn’t have something to do with Wellington’s rental market somewhere across the pages. Almost every day, someone has come up with a new idea to solve Wellington’s ‘crisis’.

 

 

Fingertpointing Illo-1.jpg

 

As the coverage of the market increases and more people pay attention, landlords are pointed as being ‘greedy’ or ‘bad people’ for making a profit from a tight situation. 🤑

 

Of course, this has now lead to calls for rent controls in the Capital. While not in the new government’s plans according to housing minister Phil Twyford, it has been said by many that rent controls could reduce the strain on the tenants of the Capital. Here’s why it won’t work.


Undoubtedly, the biggest impact on the rental market in Wellington is its lack of stock.

 

Trademe recently released figures that suggest Wellington was facing 70% less rental property on the market than the same time last year. 🏘️📉

 

Screen Shot 2018-02-12 at 4.41.54 PM.pngSource: PropertyClub

 

Of course, this problem itself has many facets to it.

 

Landlords are choosing not to rent their properties for the long term anymore with AirBnB being an attractive option as it avoids the new legislative changes around insulation and the Residential Tenancies Act. 📝

Screen Shot 2018-02-12 at 4.46.17 PM.png

Source:Stuff.co.nz


If not AirBnB, landlords are looking to sell instead of facing changing legislation or being thought of as a ‘greedy landlord.’ Imposing further legislation, particular down the line of rent controls will be yet another reason for someone not to become a landlord.

Rent controls remove the ability for landlords to make good returns from renting their property.

Not only would rent controls decrease the number of people willing to invest in property, but it could also have damaging impact on the quality of current rental stock.

 

CashflowKink.gif

With landlords having less cash flow through their portfolios, there would be less available income to improve the quality of their property. 💸

 

Not only this, but there would also be less incentives for landlords to improve their properties. Of course, increasing the rent because of these improvements wouldn’t be a possibility with the controls in place so why would landlords bother?

Allowing landlords the freedom to charge market level rent for their properties encourages and allows them to make continuous improvements benefiting the tenants and the condition of the country’s housing stock.

Of course as it is, some landlords choose not to improve their properties. Though that is reflected in the current price. A majority of our landlords at Tommy’s present their properties immaculately.

As a direct result, they are able to achieve a high level of rent when compared with the other housing stock on the market.

 

If rental controls were introduced, those landlords with high quality housing stock could potentially see their properties being rented at the same, or similar price to the lower quality stock on the market.🏚️ ⚖️🏠

 

Screen Shot 2018-02-12 at 4.51.12 PM.png

Source: Stuff.co.nz

Value is subjective.

If a tenant is happy to pay a little more to secure themselves a high quality, well presented, modern, warm, dry and safe home, surely landlords should be encouraged to provide this type of property by being able to charge a little extra.

The reality is clear then.

While it is difficult to deny that Wellington is facing somewhat of a crisis when it comes to the rental market and increasing housing prices, controls on this cannot be seen as a viable solution. 
What the solution should be remains to be seen.

 

AddedValuegif.gif

However what is for sure is that property value will always be subjective. 🔍Gas cooking, renovated bathrooms or heatpumps are great examples.

 

This should always be reflected in the price as it encourages landlords to venture into property investment, improve the quality of the nation’s housing stock and in the long run balances the market as there are more properties available to rent.

With the rental market under intense scrutiny, it is extremely important to make sure that your property is priced correctly in the marketplace.

If you would like to find out what your property might rent for, or how rent controls could affect you, feel free to call Jack anytime on 04 979 6363.

Now providing property management services in Newtown.

Jack Vale

Business Development Manager

Topics: insulation, quality, rental control

 

Subscribe