Legislative changes for landlords, while well-intentioned, may be having unintended consequences in Queenstown.
Asked to comment on the rental housing crisis, Roost mortgage advisor Mark Pullar says there are a raft of things in play for rental property owners, leaving many with little choice but to hike rents to cover increased costs.
Those include a significant rise in their interest cost, increasing tax costs, the financial investment required to bring rental properties up to ‘healthy homes’ standards, increased insurance premiums and rates.
Further, changes to the Tenancies Act means rent changes can only be made annually.
That can lead to a ‘‘large and sudden’’ increase for tenants.
He uses the example of a three-bedroom property, where the owner may have reduced rents through Covid to about $600 a week.
That was sustainable while interest rates were about 3.5%, but a year on, that same owner may be facing a hike to 6.5%.
‘‘[They] may have little choice to move the rent, in one go, to [about] $750, which would be closer to current market rates.’’
Pullar says, anecdotally, about 50% of fixed-rate loans in New Zealand may be re-pricing from about 3.5% to 6.5%.
‘‘If the owner of this three-bedroom rental has a loan of $600,000, then the interest cost will move from $400 per week to $750 per week, overnight.’’
Additionally, if they’re faced with the removal of tax deductibility of the interest, that’ll add another $40 a week to their tax bill.
‘‘Without any allowance for an increase in maintenance, rates and insurance costs, the property owner faces a situation where the rent only partially covers their costs,’’ he says.
‘‘In any market you may see isolated cases of some property owners exploiting the lack of supply to increase rents beyond what would be considered market rents.
‘‘However, in our experience, the vast majority of rental property owners, and their property managers, act with integrity and are in a situation where the owner may have no choice but to increase the rent they charge.’’
He also thinks well-meaning changes made to tenancy laws, intended to provide more secure tenure, but making it difficult for landlords to end a tenancy, may be leading to more unoccupied homes, or homes being put on Airbnb.
‘‘We may see less holiday home owners willing to put their houses into the rental pool for six to eight months of the year, and then taken
out for personal or short-stay use, because it’s easier to leave it empty.’’
Pullar’s acutely aware it’s ‘‘very difficult’’ for a first-home buyer to squirrel away money for a deposit on a house while rents are so high, it’s also tough for some property owners to cover, or even partially cover, their significantly-increased costs without raising rent.
‘‘Some owners may have a choice, some may not.
‘‘It’s a very difficult issue.’’
