Rents higher under property managers

Meanwhile, a Consumer NZ investigation has found renting through a property manager costs tenants $7 a week more than if they rent directly from a private landlord.

The investigation arrived at the sum by asking the Housing and Urban Development (HUD) Ministry to compare the value of bonds lodged by property managers with those lodged by private landlords.

It found more than 40% of tenancies are overseen by property managers on behalf of landlords. In the past year alone, property managers lodged more than $162 million in bonds.

Consumer NZ says while the approach they took to the investigation wasn’t perfect, there’s no single source of truth for who owns what property and how much they charge for it.

To add to the confusion, bonds

“A key factor is landlords now not being able to claim their full interest costs as an expense,” says Kearins.

“Alarmingly, that’s only going to get worse, as interest rates increase and the policy rolls out to completion.”

The amount able to be claimed reduces to 50% as of April 1.

“Banning interest deductibility really seems to be both hurting and deterring ‘mum and dad’ landlords,” he says.

“Many of these people once viewed a rental property as a good investment.

“Now many are now either getting out of the residential rental market, or not considering it in the first place.”

Kearins says the ongoing costs for landlords is seeing them re-direct their money and focus towards commercial property syndications, the share market, or even bank term deposits given the rising returns.

“Not only do extra costs see Kiwi landlords fleeing the residential rental market, but it’s flowing through to rents, with overall rents reportedly up $150 in the past five years, only adding to the country’s cost-of-living crisis.” aren’t lodged for all tenancies. And because they’re lodged only at the start of a tenancy, they don’t capture rent increases for existing tenancies. Furthermore, bond lodgement forms are not designed to definitively capture whether there’s a property manager involved.

Those provisos aside, the results are significant, says Consumer NZ: across price ranges, properties rented through a property manager are consistently more expensive than those rented privately.

Consumer NZ says part of the difference may be that property managers tend to rent out higher-value properties, but that’s unlikely to account for the full difference, according to HUD. While correlation doesn’t mean causation, the data signals the property management industry may have an impact on rent prices.

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%.

That fee structure may also incentivise property managers to push landlords to raise rents as much as they can.

Residential Property Managers Association (RPMA) chairman David Pearse accepts there may 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 as to when they will raise rent and by how much.

Anecdotal stories suggest property managers may raise rent in circumstances where landlords would not – even without the landlord’s knowledge.

As the property management industry grows, and more rent decisions are informed by the advice of property managers, market rent may rise faster than it otherwise would.