Landlords worry about tenant damage, lending rules

Monday, 16 October 2017

Property investor Lisa Dudson has had a run of bad luck with damage to her properties.

She estimates there has been $28,000 of damage done to one Auckland property in particular in the last year.

Landlords are worried about the damage tenants do, particularly with methamphetamine.

'There's a lot of talk about evil landlords but not a lot of talk about tenants damaging property.'

Taking a case to the Tenancy Tribunal might not offer much of a result. 'I might get paid $5 a year for the next 365 years.'

* What being a landlord has taught me**

It was harder to make a claim for damage since a court ruling last year, she said, which meant landlords could not require their tenant to meet the costs of repair or pay damages when they had insurance specifically designed to cover that damage.

Damage had to be proved to be intentional.

The results of the latest ANZ/New Zealand Property Investors' Federation survey show damage to property and regulation are investors' top concerns - regulation was cited as a risk by 52 per cent and damage 35 per cent.

Almost half said the Reserve Bank's limits, which require investors to have 40 per cent equity in new loans, have significantly affected their investment strategy over the past year.

Dudson, who also operates a firm that helps people find properties, said the effect of those loan-to-value (LVR) rules had been dramatic. She said 'mum and dad' investors had been shut out of the market. 'It's made a huge difference.'

The survey showed investors seemed to have decided the bottom of the market had been reached - the number who said they planned to purchase another property stabilised this year after steadily falling from 2011.

About 70 per cent said they planned to buy again at some point. Sixty-one per cent of Auckland investors planned to buy again within two years, the highest of all the regions.

But the number of people who could not purchase because of regulatory changes increased from 18 per cent to 33 per cent.

The survey found that only 3 per cent of investors now expect house prices to increase by between 11 per cent and 20 per cent, compared to 19 per cent of investors in 2016.

The proportion expecting zero growth over the next year has risen from 3 per cent in 2016 to 13 per cent from the 2015 survey.

Rental expectations have also reduced. Respondents across most of the country expected rental income to increase or hold steady over the next year but the percentage of investors expecting zero growth in the short term has risen from 10 per cent in 2016 to 19 per cent.

'The 2017 ANZ Residential Property Survey results suggest that an inflection point has been reached in the market,' said ANZ head of mortgages Glenn Stevenson.

'While most investors continue to expect positive changes in property values over the short and medium-term, and in rental income, particularly over the medium-term, expectations of growth have moderated considerably since last year's survey.

'Despite this, the survey reveals investors remain strongly committed to the sector.'

Commentator Shamubeel Eaqub said it was notable that Canterbury investors expected rental increases. 'MBIE data has been showing falling rents for three years now. Suggests extreme caution in interpreting this data - as these investors' expectations are not very accurate.'

He said investors' concerns around methamphetamine damage - half those worried about damage were worried about meth - signified the need for government guidelines.

Tony Alexander, chief economist at the BNZ, said with investors so strongly rating the LVR rules as a constraint on what they did, the Reserve Bank could feel warier of easing them, for fear of sparking an investor resurgence.