Old Business – the Good Old Days
The popular view of rental property investors in New Zealand is mostly grey haired and rich old people (Boomers, if you will) who got lucky buying rentals when they did. Another interesting assumption is that they are all rich, and equally they are all greedy.
Nothing could be further from the reality of it all. Most rental owners are diligent, caring property owners who only want the best for their tenants. They take care of maintenance issues, treat their tenants with respect, and work hard to ensure that their properties are well looked after.
Significantly, a much higher proportion of rental owners than you would suspect have only one rental. Again, the popular view is that investors own multiple properties, and also that they skew property prices somehow. This is not the case.
For their troubles, private landlords and rental owners often get unfairly criticized and pilloried. Property managers also get lambasted, the popular description being a clipboard carrying, vinegar faced midlife woman who tells tenants to tidy their room.
“There’s a disturbance in The Force…”
There are several pointers as to why things are changing. The Government obviously has had a lot to do with driving things. Changes to the RTA, the introduction of the Healthy Homes Standards, and MBIE’s team of investigators physically going out into the real world and auditing real landlords and property management companies are just some of the market shakers of recent times.
Those legislative changes have prompted many commentators to cry “foul”. They take the view that investors won’t approve of these new rules of the game, and a mass sell-off of rentals will happen, and quickly. While many rental investors are “at that age” and ready to sell anyway, but the mass sell-off hasn’t really occurred. In fact, the property market in general has gone completely the opposite way to the expert’s predictions.
New Business – What Just Happened?
There are other forces at work now. The clearly outdated view of rental investors as crusty old grey people is fading, and there’s a new breed of investor marching on the market. They are in their 30s and 40s (and sometimes in their 20s), and they want to buy a quality product with little or no maintenance. They don’t generally have a lot of experience in home maintenance and DIY like the previous generation. They prefer to buy new properties to dodge that bullet.
They perhaps don’t fully understand what the Healthy Homes Standards mean to them, but they’re not scared by them either. This new generation also doesn’t want to deal with tenants and the management of it all. Simply for those two reasons, property management companies are seeing steady growth in their business. There’s clearly a shift away from the good old ‘DIY / she’ll be right / No.8 wire’ approach to it all.
Supporting this new group of property investors are many things that were not available to the previous generation. Interest rates are at historic lows and falling, and new properties can be bought with a 10% deposit. Many new investors are realising that their Kiwisaver can be accessed to cover a huge chunk of that 10% deposit if they buy a new property.
On the other side of this are the developers who are buying up sections and tearing down the original property to replace it with eight or more townhouses. I know this because it’s been my recent experience appraising more brand new townhouses than I’ve seen in 20 years of managing properties.
And so the disturbance is a good one. Change is good, and the New Zealand rental market has been needing this change for a long time. Welcome to the New Investors.