We know what is squeezing the life out of the rental market

[eri]

increasing taxation won't grow the economy

shutting off migration won't improve productivity

raising housing costs won't increase affordable housing

sadly

37+7+6% of the country

either don't understand

or don't care

[flyernzl]

So less ma and pa landlords and more rentals in the hands of big corp. landlords and on it goes.

cheers,

Donna

However - in NZ there is no money in it for 'Big Corp landlords' who would need to pay tradies rates to keep to all the many onerous obligations the RTA places on landlords in this country.

The Hobsonville developers made a big play last year how they were going to lease out a number of brand-new residences on long-term secure tenancies.
However, that has all gone suspiciously quite since - maybe someone has pointed out that they would need to replace the tap washers, mend any broken windows, repair all 'accidental' damage, pay for the water fixed charges, and replace stove elements at their own costs with no liability on or recompense from their tenants.
It would be a lose-lose game for them.

[Don't believe the Hype]

However - in NZ there is no money in it for 'Big Corp landlords' who would need to pay tradies rates to keep to all the many onerous obligations the RTA places on landlords in this country.

The Hobsonville developers made a big play last year how they were going to lease out a number of brand-new residences on long-term secure tenancies.
However, that has all gone suspiciously quite since - maybe someone has pointed out that they would need to replace the tap washers, mend any broken windows, repair all 'accidental' damage, pay for the water fixed charges, and replace stove elements at their own costs with no liability on or recompense from their tenants.
It would be a lose-lose game for them.

Why do you think that a corporate landlord who can deliver scale could not profitably run a property portfolio?

There is so much scale that can be achieved and without the bleeding heart sob stories to Mum and Pop landlords helping keep rents down the review would take rents to market each and every year. Rents would be high but the standards of those rentals would be high too.

There is millions and millions of dollars looking for a home in Kiwi saver funds. If you look to what has happened in Australia which has had a similar fund (called Super Funds) for more than 2 decades which is both compulsory and at a higher investment rate (started at 9% and heading towards 12% of salary). As of March 2015 there was over $2 trillion invested compared to the TOTAL VALUE of NZ property as of March 2018 at $1trillion. It would be possible for Aus Super funds to own every residential home in NZ twice over.

The NZ Kiwisaver scheme is far behind on both value and contributions at as June 2015 having a value of $28.5b - which is roughly 3% of the total 2018 residential housing value.

[flyernzl]

Because a few have tried - and in each case crashed and burned.
The earliest one I can personally remember was back in the early 1970s.
It did not last long.

I think there are possibly one, maybe two, small-scale ownership firms that set up to solicit money from the public to invest in residential rental housing.
In each case the promoted concept was to buy the house, rent it out to cover the operational costs, and then sell that property to reap the capital gain. (Unsure about the tax implications of that!)
They also have gone very quiet lately.
It's rather like the retirement village model, where the real profits come from unit resale rather than the daily running of the thing.


It's all a bit like trying to run a 7-day corner dairy on corporate lines - economically unviable.

[Davo36]

shutting off migration won't improve productivity

No but that's not why it needs to be shut off.

It needs to be shut off because:

1) More people coming into the country must increase demand for accommodation. Must have an effect on rents and house prices.

2) It keeps wages low.

3) We need time to catch up with the infrastructure. Newly opened tunnels in West Auckland are pretty chokka at each end of the day now.

[PC]

Would the retirement village model work for residential investment?
Sell a license to occupy, charge a monthly fee then stiff them on capital gain at the end.

Probably not since the license to occupy price is equal to buying a place freehold.

[Wayne]

Would the retirement village model work for residential investment?
Sell a license to occupy, charge a monthly fee then stiff them on capital gain at the end.

Probably not since the license to occupy price is equal to buying a place freehold.

Also they would live too long so takes longer to recycle the capital like the villages do.

[PC]

Don't most people move on after ~7years?
Target breeders - they'll need something bigger soonish...

[Don't believe the Hype]

Because a few have tried - and in each case crashed and burned.
The earliest one I can personally remember was back in the early 1970s.
It did not last long..


It's all a bit like trying to run a 7-day corner dairy on corporate lines - economically unviable.

The thing is last time they didn't have $2 trillion dollars (Aus Super fund) looking for a return - small in NZ but assuming 50% of people are in Kiwisaver then 1.5% of the national gross wage is looking for an investment return by Kiwi saver fund managers.

Beyond that they could ensure that their costs (i.e. maintenance/management etc) were minimised by offering services to the open market

Rates - could you negotiate a bulk rates discount ?? - not sure does HNZ pay full rates?
Insurance - on this scale the organisation would likely self insure
Maintenance labour - mix of corporate and paying customers as per example below
Maintenance materials - with scale I'm sure the cost of materials would be very competitive
Management - mix of corporate and paying customers as per example below
Finance - funded out of the Kiwi Saver fund (saving 4-5%)


I.e. If they're paying a handyman to do maintenance a salary of say $50k + van the total cost is somewhere in the order of $70k - this individual could then be charged out to the private market at $45/hr. Roughly 30 hrs a week would make this employee cost neutral leaving him 10 hrs (or roughly 1.5 days) a week to work at no cost on the corporate assets.

In essence the Kiwisaver fund becomes the owner of the property and the financier of the property. The only costs you couldn't remove from the equation is materials and rates. The return is then essentially slightly lower than the Gross Yield on the property year 1 + any portfolio capital gains and then the corporate machine would ensure rent reviews happens annually and that rents were at market - before you know it the returns on these properties are spectacular.

Taking a real live example - one of my properties that I've owned for 10 years.
> First rented at 7.7% Gross Yield on Purchase price. Taking a small maintenance materials cost and rates might make that return 4% yr 1
> Currently rented at 20118 Gross Yield on Purchase price. Using the same maintenance materials and rates costs 15% yr 10
> Projection rented at 2028 assuming 3% annual rent increases would result in the Yield being 21.4%

[Wayne]

Don't most people move on after ~7years?
Target breeders - they'll need something bigger soonish...

They wouldn't be able to move on after 7 years because, since the 'owner' has stolen all the capital gains, they wouldn't be able to afford the next step.
They would be locked in until they die - much like the village dwellers.

[artemis]

lets not confuse the driver of homelessness- it's not the rent going up it's the sale of rentals to home owners who don't have the same level of occupancy

maybe we need to force home owners to fill their spare bedrooms or be taxed - an empty bedroom tax

Another big driver of households living in poor conditions is that for many no landlord will take them on. Mainly because of the Tenancy Tribunals. Every year they publish names and details of tens of thousands of bad tenants and bad tenancies. Easy to search. Property managers and some small landlords are very likely to do TINZ, credit and social media checks on top of checking references.

[eri]

banks won't lend to bankrupts either

[Bob Kane]

The thing is last time they didn't have $2 trillion dollars (Aus Super fund) looking for a return - small in NZ but assuming 50% of people are in Kiwisaver then 1.5% of the national gross wage is looking for an investment return by Kiwi saver fund managers.

That old joke:
Question: How can you end up with a billion dollars?
Answer: Start with a trillion and buy residential property and become a corporate landlord.

The corporate approach doesn't work for residential property.
There's not enough fat to support the head office employees.

[JBM]

That old joke:
Question: How can you end up with a billion dollars?
Answer: Start with a trillion and buy residential property and become a corporate landlord.

The corporate approach doesn't work for residential property.
There's not enough fat to support the head office employees.

Exactly why they go commercial much more stable.. business dealing with business ..

[flyernzl]

The thing is last time they didn't have $2 trillion dollars (Aus Super fund) looking for a return - small in NZ but assuming 50% of people are in Kiwisaver then 1.5% of the national gross wage is looking for an investment return by Kiwi saver fund managers.

One of the perennial problems with large Superannuation funds:

One section of the population sees them as a profit-seeking enterprise seeking to maximise returns for those people investing, which will support those investors in their old age.

Another section of the population see them as large piles of cash just itching to be invested in socially desirable but low return good works.

Unfortunately, you cannot do both.