How to adapt to a slowing rental market

Tuesday, 9 August 2022


There are many reasons why this has been the case. The main one is that we have seen more properties enter the rental market, as vendors who would typically have sold have moved these properties to the pool of rentals.


It may have come as a bit of surprise to see headlines stating that the rental market had swung in the favour of tenants. There are a number of reasons why this has been the case. The main one being is that we have seen more properties enter the rental market as vendors who would typically have sold have moved these properties to the pool of rentals.


There are other factors at play. There has been a slowdown in tenant movement. Towards the end of 2021 there was a large amount of rental properties that were sold, creating high tenant movement as many landlords vacated the market. However things have changed dramatically. With interest rates increasing as well as inflation now at its highest level in over 30 years, the property boom came to an inevitable stop.


We are also witnessing a brain drain as many young people head overseas to do their OE as well as seek better opportunities whilst immigration coming into the country hasn’t even come close to hitting pre-pandemic levels. The majority of people leaving New Zealand will likely be renting and as these people leave the rental pool they are not being replaced. In the last two years we have seen double digit rental growth in most regions across New Zealand, do not expect that to continue.

Historically it would have been easy for the landlord to find a tenant. The quality of the property as well as the advertising could be well below par though with demand for rental stock being high, landlords could get away with it. Things have now changed and this is not a bad thing. With landlords now competing for a smaller pool of tenants there is a greater emphasis placed on the quality of the product that they are offering as well as the quality of the marketing.

There also appears to be a greater emphasis on who is actually managing the property as well. Research undertaken by New Zealand based prop-tech company Renti, highlights that most prospective tenants will search and apply for properties that are managed by professional property management companies rather than looking at privately managed properties. Their software helps process tenant applications for rental properties and all tenants who applied for a property using their software in June, 81.1% completed a tenancy application for professional listings and only 38.2% completed it for self-managed listings.


It would be interesting to understand why this is the case. One may suspect the tenants would rather deal with a professional property management company as they should have a greater understanding of the rights and responsibilities of both parties.


If I am a landlord looking for a tenant in this market I would place considerable emphasis ensuring that my property is well maintained, presented as well as being warm dry and healthy homes compliant. Ensure the property is affordable to run as there will be a greater emphasis on energy efficient properties. I would also ensure that the quality of marketing is excellent using professional photography with floor plans and digital walkthrough tours. Your property has to stand out. I would provide information regarding the level of compliance with healthy homes and if possible give estimates as to how much it would cost to run the property regarding electricity and gas consumption. Make sure that your property is immaculate and look to rectify any defects which may hamper the renting of the property. Also try to make the property as low maintenance as possible.

Think about your target market. Ask yourself whether you would be prepared to live in the property because if you wouldn’t, why would you expect a tenant to do so? Be open to allowing pets and make sure that you have done your research regarding what is happening in the market.

And finally, if you do not want the stress of it all, find yourself a professional property manager who can take the burden away. That may be the best investment you make.





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