Boom time!! Why the future of Property Management is looking up

The Property Management industry could be set for unprecedented growth and we explain why

With so much chaos in the world at the moment, it can be a challenge to be overly optimistic about anything. There is one thing though that I am extremely optimistic about. The future of the Property Management industry. 

Earlier this month, Property commentator, Ashley Church made the headlines after he made the comment that this Government is ‘the most anti-landlord Government probably in the history of our nation’. There has been so much debate over the last few months particularly around the inception of the Residential Tenancies Amendment Bill (RTA Bill) and certainly whilst this Government has been in power, the rules have been constantly changing.

Whether he is right or wrong is open to debate though there will be plenty of landlords who agree with him. One thing that is undebatable is that this Government has certainly made it more complicated and time-consuming to be a landlord. Last month I wrote about how tenants have never had it so good. This month I am stating that the real benefactor of this Government’s stance to renting and landlords will be the Property Management industry.

People will always invest in property.

Now that the dust is settling and the RTA Bill has finally been passed, we all have to prepare for the 11th of February 2021, the date when the bulk of the amendments will take place. This is, without doubt, the largest overhaul of rental legislation since the inception of the RTA back on the 1st of February 1987. There are over 40 new sections to the RTA as well as an increase in the number of exemplary damages as well as a new list of infringement offences.

Copies of adverts and prospective tenant communication have to be recorded for up to 12 months after the end of a tenancy. Landlords have to have evidence of compliance with healthy homes and all proof that all work done on the property complies. And dealing with problematic tenants can be fraught with risk as giving notice without reason, is no longer an option. Being a self-managing landlord can no longer be looked at as a hobby. It is a full-on business and you need a professional to manage it as well as keep you compliant. But will all of this deter people from becoming landlords? No. People will always invest in residential property, whether it be through owning one or two properties or whether it be investing in concepts such as Build to Rent. With the world environment as it is, where else would you put your money?

However, the more complex being a landlord becomes, the more you need professional help to keep you compliant and to protect your investment. Professional Property Management is going to become more relevant in the coming years.

It is not about increasing rents, it is about power and control

Our industry has largely been opposed towards the removal of the 90-day no-cause termination notice, by far the most controversial of the changes. The usual rhetoric of landlords selling, increased costs and rents being driven up have become the ‘new norm’ every time changes in legislation has been proposed. It is starting to sound like an old damaged vinyl record continually repeating itself. I actually find the remarks somewhat hypocritical. I am working back in the coal-face, and although it is a completely different industry to one I started working in over 15 years ago, somethings have never changed. The vast majority of landlords continually want higher rents.

When landlord groups complain saying changes in legislation will increase rents, it is like shareholders of company complaining saying ‘Don’t do this, you will increase revenue and increase the value of our company!’ It simply makes no sense. I would rather these groups say what it is instead of trying to convince people that they do not want to see rents go up. What the debate is really about is power and control. People generally do not like being told what to do, and as Government interference increases in the private residential rental sector, landlords do not like it.

I have read the RTA amendment bill, multiple times and overall, I actually think the Government has got it right. 

Yes, tenants should be given a reason if their tenancy is ending. This is only fair and reasonable. 

Yes, tenants should be able to make minor alterations. It is their home.

Yes, rent bidding should be outlawed and rent increases should only be allowed to happen once a year.

And yes, there should be an increase in exemplary damages for non-compliance.

There are things about the bill that I do struggle with. The antisocial rule of three strikes in 90 days will almost always be impossible to prove and this should have been extended to at least 180 days. I also have concerns around Tribunal jurisdiction increasing to $100,000 from $50,000. There is also nothing about speeding up the process for Tribunal and this will desperately need work as we will likely see an increase in cases from both tenants and landlords. However, overall this bill will improve the renting experience in New Zealand as every law-abiding Kiwi deserves a warm, dry and safe place that they can call home.

Regulation of the Property Management industry beckons if the status quo remains

The election result is by no way a foregone conclusion. The longer this Government bungles along trying desperately to contain COVID and support a haemorrhaging economy yet failing to be transparent about border failings, the more the public will turn against them. However, at this stage, the most likely election result will be a Labour-Green coalition.

If this does eventuate, part of the coalition deal will be that the Greens get to enforce their housing policy. This will include the regulation of the Property Management industry along with the introduction of a landlord register as well as the introduction of the Rental Warrant of Fitness.

It will also mean that the Capital Gains tax will be back on the agenda.

So far, only the Greens have come out with a policy around housing and co-leader Marama Davidson is extremely passionate about this. Although they wrongly believe that speculators drive up prices, there is a lot to like about what they are suggesting. Davidson said at the launch at their Homes for All Plan, that the Property Management industry would be regulated and Property Managers will be held to the same accountability as Real Estate agents. Along with this, a move to develop a landlords register will see more landlords move towards professional Property Management. 

Looking at their housing strategy, it does make sense giving social housing providers the ability to extend their borrowing limit. Although I agree it is important to provide homes for all, social housing cannot become a lifestyle choice. People need to be motivated to better themselves and living off the state on minimum rent in a social house is not a long term strategy for economic growth.

All of this means that there will be a significant growth within the Property Management industry and landlords switch from self-management to professional management. It is estimated that just over 40% of the private rental sector is managed by a Property Manager. I would not be surprised to see this double over the next five years. 

I have been saying this for some years now. There will be more properties being professionally managed but by fewer companies as the cost of regulation may be too much for some smaller players. Also, do not rule out anti-money laundering rules coming into play for the Property Management industry as well. This will be too much for many small operators.

As ever, we will keep you posted and up to date with the increasingly complex world of renting in New Zealand.