Ensure strong rental returns despite declining market
New Zealanders have a love affair with residential property and it has been a stable investment for many years.
Many regard investing in property as a wise and safe way to build wealth, however, home values have been consistently falling across the country for 10 months now, with economists predicting further price declines in 2023.
Landlords For Kiwi Property Investors has compiled five tips landlords should consider to ensure they are receiving the strongest rental return on their investment.
Make sure investment property is in tip top shape
The first and most obvious is to get it clean, inside and outside, because when a potential renter inspects the house, the cleanliness makes the first impression. This will also set a standard so when tenants move out as it’s expected to be just as clean as when they moved in.
Landlords For Kiwi Property Investors also suggests getting all carpets professionally cleaned, attend to any paint work issues, ensure all features and assets such as lights, taps, ovens, around the property are in working order and do a security assessment of all locks, pins, latches etc for the security of your investment and your tenant’s home.
Adhere to Healthy Homes Standards
From December 2020, landlords must provide a Healthy Homes Compliance Statement for most new or renewed tenancy agreements. Failure to demonstrate your property’s current level of compliance may result in penalties, so ensure your home is compliant.
Marketing is vital
Landlords For Kiwi Property Investors says you can have the prettiest, most affordable and accessible property on the market, but poor marketing means you can loses out on investment potential, so engage a good property manager who cand bring awareness to your property in multiple platforms both on and offline.
The legal stuff
Ensure your insurance is in order and notify your insurer and bank that you are leasing out your property and you will not be living there. This could have a positive impact on your policy as your insurance company may include protection from tenants’ damages, something your regular insurance policy does not cover.
Engage a professional property manager
A professional property manager should take care of all of the above, which is part and parcel of what they do for their clients. They are your ‘eyes, ears and mouth’ for your investment as they take of the maintenance, administration, tenanting and more.
Interest rates on the rise
The latest Crockers-Tony Alexander Investor Insight found 62% of those polled preferred to lock in a one-year fixed term over longer options.
Independent economist Tony Alexander (pictured above left) said the result reflected expectations that monetary policy would loosen over the next year and continued the fall in the average fixing term preferred by borrowers.
“I think there’s a growing realisation that with the economy potentially going into recession, inflationary pressures definitely will eventually fall away and that means the Reserve Bank will be cutting interest rates, probably strongly, through 2024-2025,” Alexander said.
“So, an increasing proportion of borrowers will be looking to take advantage of the falls in rates, when they eventually come along and, of course, the only way to do that is either float or fix for one, maybe towards the two-year area.”
Prices fall further
New Zealand’s housing market downturn continues as property values recorded a 0.3% fall in January.
CoreLogic NZ chief property economist Kelvin Davidson (pictured above right) said it was still too early to discern whether last month’s political changes had any material impact on the property market.
“No doubt some existing and would-be property investors will be hoping for a National victory and a follow-through on their promise to reverse Labour’s Brightline and interest deductibility changes - but as the old cliché goes, there’s nothing guaranteed in politics,” Davidson said.
“The Reserve Bank released its gloomy outlook for both the economy and inflation for 2023, which was always likely to impact property values in the following few months. Admittedly, we’re not seeing any real evidence yet that homeowners are looking to ramp-up their selling activity – they can generally sit on the market for as long as it takes, or just delist.”