Possible After Effects Of Alert Level 4 on the Rental Market

What Property Experts Have To Say…

The Alert Level 4 Lockdown has already impacted the rental market in an adverse way and has immensely slowed rental income/investment for some landlords. According to a survey run by a property management consultancy Real iQ, it seems the rents in New Zealand are likely to fall as a result of Covid-19 and the Level 4 Lockdown. As we as a community seem to be making some head way in terms of fighting off this lethal virus, our property rents may not be in for the same.

The director of Real iQ predicts that property management companies in Auckland will likely face default rates of more than 20%. This means 1 in 5 rental properties are likely to fall into rent arrears. A survey carried out at the start of the lockdown period highlights an increase in rent arrears from 3.23% to 6.57% by the property management companies that completed the survey.

Based on Real iQ’s survey 40% of the property management companies taking part believe that the market rent will remain the same. The remainder have varying opinions on how much the rent could fall by, the highest being 20%.

There may be some discrepancies in the different areas that are effected. Low income towns such as Mangere, Papakura, Manurewa, in South Auckland may not be highly effected as rents are already generally low. Whereas the high-end rental suburbs may see a bigger effect on their market revenue and rents as staff are laid off and contracting work is slowed down or put to a stop and rent becomes less affordable. One of the mostly effected areas could be the Auckland CBD with its apartment market and student accommodation.

“If rents exceed more than 40% of the tenants net income, then they will likely struggle with payments. Incomes are going to decrease and rents will follow”, says David Faulkner (Director of Real iQ).

As unemployment increases in these coming months things are not looking good for the rental market. “The net income for New Zealanders will be negatively impacted and this, in turn with an increased supply of rental property will lead to an inevitable drop in rents.”

David believes that landlords are likely to sell their investments as employment/income rates continue to plummet and they are forced to release capital or mortgage sales.

Whilst it may be a bit worrying to be a landlord right now Reliance Property Management is here to help. With our knowledge in property and the rental market we can provide you the best advice when it comes to renting out your investment. We also have experience dealing with rent arrears and means of retrieving your rent money, as well as a database of tenants who are actively looking for rentals to ensure your property is not left empty.

There may be some things you could do during the lockdown or your downtime to make your rental property look more attractive.

Clean up your entrance – your entrance is the first thing people see, so you want people to have a good first impression.

Garden – make sure the lawns are mowed and the garden is nice and tidy.

Fencing – gives your property and tenants added security and privacy. It also increases the value of your property.

General Maintenance – use this time to fix small wear and tears that may have arisen over the years. In turn helping you find better tenants.

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