Factors Influencing the Uptake of Rental Properties Previously Written Off by Insurance Companies

November 29, 2013

Yesterday we posted a news bulletin “ Houses Earmarked For Demolition Are Being Rented To Desperate Tenants” which highlighted the worrying revelation that there are no policies in place that set standards for rentals, in light of the fact that some landlords are putting rental properties on the market that insurance companies had previously written off.

The issues around this are complicated and there are no simple solutions. It takes time to implement change through policy. Equally the situation in Christchurch is unique, with all sorts of ‘opportunities’ presenting themselves. What are some of the factors and ‘opportunities’ influencing the current rental market?

One question that comes to mind is, are rental prices too high? Our property managers all agree that the market, pre-quake was depressed. Now there is demand, landlords are taking the opportunity to up the rents, enjoying higher returns on their investment, but this and the demand for short term rentals has had a knock on effect, leaving people at the bottom end of the market struggling to find properties that they can afford or renting properties that are in dubious condition.

Another factor that is influencing the rental market is the effect the introduction of the constraints of the LVR (loan-to-value ratio is a measure of how much a bank lends against residential property, compared to the value of that property) has had on the real estate market. These constraints are acting as ‘speed limits’. It is harder now for first time home buyers and many have dropped out of the market .This has encouraged investors back in - first home buyers need to continue renting. Interest rates also remain low which is an added incentive for investors.

There is a demand for rentals in the lower price range and there are some landlords who are ‘opportunists’, riding the tide on the back of a desperate people trying to make ends meet. Fortunately there are more landlords out there who are working with their property managers to offer healthy, safe and affordable housing.

What do we recommend for tenants and landlords?

Our property manager’s advice to tenants: Look at properties via property management companies, avoid private rental agreements. Timing is key so trawl through the individual property management companies websites early in the day as Trademe does not post until 3pm, early birds do catch the worm.

If you are a new landlord or looking for long term investment options, be realistic, look for reasonable rents and long term tenants rather than trying to gain a quick buck from short term tenancies. Short term tenants’ who have no connection to the property or community may not look after the property as well which results in higher repair costs, at your expense.  Also, be mindful about putting rents up too high, you may loose a good long term tenant and find yourself dealing with short term tenants who are unreliable.

Finally, Diane Horner’s words in, ‘Find The Key To Rental Success’ stand out, “Property investment, particularly over the long term, can be a profitable undertaking, but like most other enterprises, it requires a spectrum of skills and expertise from trusted advisers”. The Press, May 22nd.

Our thoughts go out to the many people who are struggling to find properties or those that have been given notice to move out in the next 8 weeks, making their Christmas far from jolly. First Avenue is endeavouring to place people in to a home where they can enjoy the Christmas New Year break. 

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Filed under Christchurch Earthquake \ Insurance

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