I hear this being mentioned on Social Media, and when I’m talking to people in my day to day stuff. “Bloody landlords!” they say.
“Rents are skyrocketing and it’s the greedy landlords causing it!” they say….
And now the MPs are getting in on the action. Finance Minister Grant Robertson has called for Wellington tenants to dob in dodgy landlords who are unfairly raising rents.
“My office has heard from Wellington renters who have suddenly had their rent increased by $50 a week – exactly the amount that the maximum loan living costs will be increasing by this year,” Robertson, who is the Wellington Central MP, said.
Before you go accusing landlords of being money grubbing greedy devils, you need to understand the fundamentals of an open market place and allow yourself to see the reality of why rents go up and down. And before you jump in; yes, they do go down as well as up.
I’m not going to give you an economics lesson. I actually failed my Economics papers twice, therefor I’m not in a strong position to do that. However, I’ve got enough experience in the rental property market to understand broadly how it works, so I’ll tell you what my current first hand experience is with the Wellington rental market.
Down with That Sort of Thing!
Rents in Wellington have stayed pretty static with very little change for about four years, from 2012 through to October 2016. They stayed so static that many landlords didn’t bother doing rent reviews because rents were simply not moving. At all. In some cases rents were actually going down. This was not reported by the media, and Grant Robertson did not thump the Parliamentary table on behalf of those landlords.
Roll forward to 2016 and rents finally started to mildly strengthen. That’s when it got interesting. In October 2016, Wellington rents started to lift off and steadily continued to rise through to about March 2017. That was when they plateaued off and remained once again fairly static until October 2017.
Rents On The Way Up
Suddenly rents started to fly, and they continue to do so. It’s a relatively small proportion of the tenant pool in Wellington that are students, and not all of them may be eligible for the Government hand-out of $50 extra a week. Such a small group of landlords couldn’t possibly affect Wellington’s rental market on its own. The $50 allowance is a big help for struggling students. Landlords would be shooting themselves in the foot if they raised rents by that much directly because of that extra money.
There are very different forces at work here, and it’s incredibly naïve of Grant Robertson to think that “naming and shaming” is a viable plan. In fact, what he’s managed to do is shoot himself in the foot while his foot is in his mouth!
If you believe that a landlord can just advertise a property for any rent they want to, no matter how ridiculous, then you’re clearly not understanding the power of the marketplace. And it is powerful – market forces made landlords drop their asking rent when there were no takers for rentals a few years ago. The market now has prospective tenants offering more than the advertised rent as tenants are finding it very difficult to secure a rental because there are so few available.
Open market forces determine rents through the mechanism of supply and demand, not “greedy landlords”. At the moment, supply of rental properties in Wellington is at an all-time low, and demand is the same or higher than it’s been in the past. That means more people competing for fewer properties and so rents move upwards. I’m not seeing greed here, I’m seeing the market in operation.
In Wellington right now (mid January 2018) there are only 785 available rentals advertised on Trade Me where over the last ten or more years I’d expect to see twice that amount in January.
In Upper Hutt, there are only 32 properties available on Trade Me. In Lower Hutt, only 116 are available.
According to Trade Me, there are only 9,324 rental properties available nationwide, and that number has dropped by 700 properties over the past two weeks. It’s supply and demand in operation, brought about by a number of converging forces.
If you ask too much for your rental, no-one’s going to pay it. And as a landlord, if you’re prepared to accept less than market rent for your rental property, that’s your choice, but certainly doesn’t qualify you as “greedy”.
There’s no such thing as a (long term) greedy landlord.
managemyproperty is an independent Property Management company based in Wellington, NZ
Richard Horne remains a tireless and energetic investor and commentator, running an experienced eye over the property market and trying his best to explain the eternal vagaries of it all!