Never has the property management industry been under so much pressure. There are changes in legislation, new levels of compliance, added costs, pressure from the media, staff burnout, influences on the bottom line and an increased turnover of investors. The pressure is coming from everywhere.
A long-term industry expert provided commentary recently saying New Zealand is roughly 16 years behind where Australia is with respects to compliance and legislation. That all the changes we are currently going through, they also went through. Are they in a good place now? Well, that depends on who you ask. New Zealand is the only country in the developed world that does not regulate property management, and unfortunately, it is not going to be a quick and easy fix.
Over the last four years, we have seen the introduction of the Brightline Test, LVR ratios, Overseas Investor restrictions, AML, reforms of the Residential Tenancy Act, an increase in fines for unlawful acts, removal of letting fees, PCBU’s, Healthy & Safety, Methamphetamine, Asbestos, Insulation, Smoke Alarms, Healthy Homes Standards, Privacy Guidelines, Insurance Requirements, changes in deprecation and the introduction of MBIE Auditing powers. Change fatigue? Absolutely.
Property Brokers are in support of these changes. You ask any of the investors that we represent, and they are also motivated to provide their tenants with a healthy, safe property to create a home in. The challenge is the quick succession that all these changes have been introduced. The current cadence is potentially having an adverse effect on the rental industry, and the long-term impact could be a reduction in rental accommodation, which would be disastrous. New Zealand is already well short of providing enough homes for people to live in.
For the current year to date, compared to the same period last year, we have seen a reduction of almost 10% in the number of bonds lodged. This is a result of investors exiting the market and properties selling to owner-occupiers. It is also evidence that the average tenancy term has increased. Across provincial New Zealand, the average tenant now stays in the property for 24.4 months. When you consider the implications of this; it means a reduced turnover of rental properties and a reduction of the rental pool. Which leads to over-crowding of properties, people sleeping in illegal dwellings, people living areas of a property that don’t necessarily have smoke alarms, or that would meet the HHS requirements. “Generation Rent” – the pressure it real.
From an industry perspective, 30-40% of the working week is spent inspecting properties under management, providing reports, and processing any work orders to remedy maintenance. We use good technology, and we offer a high level of support and training for our staff. The recent introduction of the Healthy Homes Standards 2019 has now pushed the inspection proportion our of weeks well over 50%. This is due to the increasing burden to assess each property for the five new areas of the HHS. It has added enormous pressure, and we are also looking to mitigate the increased costs to our clients by using ‘start-up’ assessors through fear that it may tip them over the edge, and they will sell. What this means for the business is the number of properties that any manager can effectively manage is reducing. Where it once was 120 properties per manager on average, it is now 95.
We are fortunate the industry body REINZ has responded through the Call for Change campaign, which is supported by all leading Real Estate brands across New Zealand. This will see a new level of legislation of the industry that will result in an increased level of service and compliance, and a better rental experience for everyone - tenants and owners. Directly through a similar level of governance that was introduced into Real Estate in 2008 – the REA. It will mean those bad operators, or private owners that don’t observe these new changes will be either removed from the industry or fined heavily. Having worked through all the changes over the last few years, Property Brokers and all other major brands know that this will have the most positive impact on healthy living and compliant properties. It is as close to a ‘silver-bullet’ as we will get.
Through all this change, Property Brokers are committed to providing sound advice and steerage for our clients. We have invested hugely in ensuring that we meet the deadlines imposed by the government and have a centralised compliance team that work to support our property managers and to provide regular reporting to measure progress. We have built strong partnerships with software providers that enable our organisation to record property compliance accurately, and we have also managed to avoid passing on high costs to clients by contracting the work out to third-party providers.
On top of what we are doing in the background for compliance, Property Brokers provides owners with three service guarantees that provide a level of certainty that is rare and unmatched in the property management industry. We appreciate that these changes in the industry have a financial impact, so to provide a level of comfort we guarantee the rent, we cover extended vacancies, and we also standby our service. If we drop the ball, then we will make good on our promise.
The industry is looking at further reforms to the Residential Tenancies Act early in 2020, and we are working with REINZ to ensure that the government receives relevant feedback from the property management sector, so they get it right. So, be prepared for more change but be aware that companies like Property Brokers are professional managers, and we will continue to navigate owners and tenants through the changes.