PROPERTY NEWS

COULD GERMAN IDEAS FIX THE HOUSING MARKET?

People who rent their homes are now moving between tenancies less often than in past years. The proportion of tenants living in a home for less than a year fell to 33.7% in 2018, from 42.5% in 2006, according to Human Rights Commission data. The New Zealand Property Investors Federation (NZPIF) says this growing stability is good news for investors – and that it is time to introduce a long-term tenancy option for reliable tenants. NZPIF vice president Peter Lewis says the federation’s proposal is based on the German model, where a landlord would agree not to sell the rental, or, if they did sell, to do so only with the tenant remaining in the property. “The tenants could still end the tenancy if they need to, and they could also decorate the interior of their rental to suit their own tastes,” says Lewis. In return, under the NZPIF proposal, owners would be compensated for the higher risks involved and for giving up some of their current rights. “For example, in Germany, tenants have to provide up to 12 weeks bond for a new tenancy.” Long-term German tenants also need to give 12 weeks termination notice instead of the regular four, and may be responsible for the direct payment of property outgoings such council rates and insurance premiums.

Overall plan to fix the rental crisis

The long-term option, which would sit alongside the existing periodic and fixed-term tenancy agreements currently available under the Residential Tenancies Act, is part of the NZPIF’s overall plan to fix the rental crisis and improve the living standards of tenants. Peter Lewis says the overwhelming majority of the NZPIF’s members invest in rental property for the long term, and that long-term investors invariably seek stable, long-term tenants. “Despite the popular image, landlords do not remove tenants just because they can. They are well aware that a good tenant is valuable, and also that any vacancy in the tenancy represents a loss of income that can never be recovered.” Responding to the many tenants who would like more secure accommodation, the Government has tried to provide this by removing the ability of landlords to issue a 90-day termination notice with no stated reason. However, this has only made it harder to remove anti-social tenants who are causing problems for their neighbours and their communities. The NZPIF’s plan to fix the housing market is based on five core principles: providing stable and better homes; lower costs to enable lower rental prices; more rental properties to meet existing and future demand; facilitating improved access to justice for both tenants and landlords; and creating closer communities.

Image: Peter Lewis

INVESTORS BACK IN MARKET IN SMALL NUMBERS

The number of existing property investors saying they are considering buying another property in the coming year has increased. The figure rose to 29%, from just under 22% in August, according to the latest Tony Alexander/Crockers Investor Insight survey. The rise is in line with data from other surveys showing more investors are considering expanding their portfolios, and perhaps follows on, to some degree, from evidence of first-home buyers re-entering the market. Independent economist Tony Alexander says 10% of respondents indicated property-buying intentions - the strongest result on record - but warns against being overly optimistic. “Because it follows an unusual negative result in August, the jump should be treated with caution. “It does not signal a big movement of investors back into portfolio expansion given the many negative factors in play. These include tax changes, low prospects for interest rate cuts in the coming year, and difficulties accessing finance.” For investors looking at buying an existing property, the preference for a standalone house remains strong. For investors looking at buying a new property, the preferred option is a townhouse followed by a standalone house. The surge in demand for a new apartment over July and August has not been sustained. In the latest survey there has been a noticeable lift in interest in buying a townhouse, and a fall in demand for a standalone house. The downward trend in the number of investors who will do a development themselves has re-established itself. Reports from developers, builders, and buyers indicate problems for many newer operators, including difficulties sourcing materials, finding staff, and making projects profitable amidst soaring costs. Anecdotal reports suggest a noticeable decline in new projects over the coming one to three years.

Image: Kristin Sutherland BRING BACK INTEREST DEDUCTIBILITY

The Auckland Property Investors Association wants the Government to immediately restore perpetual-interest deductibility to any landlord who offers long-term tenancy. In August, the Government announced its intention to restore perpetual interest deductibility to institutional build-to-rent developers. One caveat is that the developed property must be offered to tenants as long-term tenancies of at least 10 years. But APIA president Kristin Sutherland says it will be years before the buildto-rent sector can add to rental supply in a material way. “We recognise that, in time, institutional build-to-rents will be a pivotal chapter to the New Zealand housing story. But these are not projects that can be stood up overnight.” Most tenants do not live in build-torent properties. And they won’t for several years. But that doesn’t mean security of tenure should have to take a backseat, says Sutherland. “There are existing rentals on the market right now that the landlord would offer up as long-term tenancies. And they should be appropriately incentivised to do so.” “It makes little sense to encourage only build-to-rent developers to offer long-term tenancies. Sutherland says if security of tenure is as critical as the Government says it is, then surely the most effective solution would be to get buy-ins from the entire rental sector – “not just a minority of would-be landlords.” “We can deliver security of tenure up and down the country right away if perpetual interest deductibility is restored to any landlord who offers tenants fix-term tenancies of at least ten years, in much the same way the Government is asking the build-to-rent developers to do.” ✚

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