Rising costs, tenant scarcity heighten investor concerns
The latest monthly Investor Insight survey, compiled by Crockers Property Management in collaboration with independent economist Tony Alexander (pictured), has unveiled several crucial trends affecting residential property investors in New Zealand.
With 266 respondents participating, the survey aims to track changes across various market indicators such as rent pressures, property concerns, and buying or selling intentions.
Investor financing accessible, investment interest shifts
A significant insight from the survey is the accessibility of financing.
“Landlords firmly feel that banks are willing to provide finance should they seek it,” Alexander said.
However, there’s a notable shift in investment behaviour, with a slight decrease in interest from existing investors looking to purchase additional properties.
Conversely, a net 17% of landlords are considering selling their properties within the next year, underscoring a potential increase in market supply amidst lagging property prices across New Zealand.
Challenges in securing tenants
Finding quality tenants has become increasingly challenging, with a record net 24% of investors reporting difficulties in securing good tenants— a stark contrast to the previous year when finding tenants was considerably easier.
This issue is becoming a growing concern as it impacts the operational aspects of property management.
Rental market adjustments
Despite intentions to raise rents, the actual rental market may not support these increases.
Approximately 56% of investors plan to raise rents in the next six months, an uptick from 52% last month.
However, national data indicated a falling trend in rents due to an oversupply of rental properties, which could hinder planned rent increases, Alexander said.
And with the national ratio of rents to household income reaching a new high at 28%, surpassing the long-term average of 26%, landlords may find their plans further complicated in a challenging market.
On average, landlords aim to raise rents by 4.3% in the coming year, reflecting cautious optimism tempered by market realities, the survey found.
Bank relations and regulatory concerns
Investors feel a change in their relationships with banks, with a strong net 15% perceiving banks as becoming more amenable to advancing credit.
This improvement aligns with heightened competition among banks for mortgage business, discussed widely in recent media.
Top concerns for property investors
Insurance costs, council rates, and maintenance are the top financial burdens concerning investors, with maintenance costs showing a significant increase as a point of worry in 2023.
Additionally, the survey indicated rising concerns about small net migration flows and its impact on the property market.
Notably, worries about falling house prices have surged early in 2024, reflecting uncertainty about the potential for sustained price increases in this housing cycle.
Long-term investment intentions
The survey also explored how long investors plan to hold onto their properties, with a notable number intending to keep their investments for at least another decade.
However, there’s a visible trend of investors planning shorter holding periods, likely influenced by the aging demographic of the survey respondents and the rising costs associated with managing rental properties, Alexander said.
