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

[Wayne]

They are just numbers, in a sense. As has been observed, LLs have to 'meet the market,' like any other product or service vendor.

LLs can only obtain $500 for what in reality may only be a $380 product when there is insufficient competition because there is a shortage of $380 products.

The $500 buyer and seller are willing, but the market price is a response to duress.

The current gummint's immigration reduction targets and fantasies like kiwibuild are intended to redress that shortage duress.

If successful, it will not be possible to obtain $500 for a $380 product.

Meanwhile, back in the drones' house, the blame game rages on . . . .

I totally agree.
One of the problems with this (undersupply leading to ability to overcharge) is the optics to the general public.
When the press show disgusting properties they are often rented for 'over the odds' leading to an outcry.
If the shit properties were offered at a shit price then there would be some defence - that there is a market for them from people happy (??) to pay little because they got 'value'.
Now I know that is a bit idealistic. I know the press would still show the shit properties and not mention the rent but PIs would have a defensible position that they are meeting the market much as $2 shops do (and the Warehouse did more than it does now).

While there is this market distortion of not enough houses allowing people to charge above the odds (but market rate because someone in the market is paying it) we'll continue to get hammered and struggle to defend.

[Perry]

Prices change but the analogy is not correct.
When I suggested that charging $500 for a $380 product . . .

They are just numbers, in a sense. As has been observed, LLs have to 'meet the market,' like any other product or service vendor.

LLs can only obtain $500 for what in reality may only be a $380 product when there is insufficient competition because there is a shortage of $380 products.

The $500 buyer and seller are willing, but the market price is a response to duress.

The current gummint's immigration reduction targets and fantasies like kiwibuild are intended to redress that shortage duress.

If successful, it will not be possible to obtain $500 for a $380 product.

Meanwhile, back in the drones' house, the blame game rages on . . . .

[PC]

The only way you get that 3rd bus is if it makes a profit to do so.
Capitalism at work.
When the socialist government has raised taxes and shifted the blame onto whipping boys - no 3rd bus.
But walking is good for you and only "fair".

[Wayne]

I hate this too... you coukdn’t imagine how enraged I was yesterday to find that the bus ticket I’d been buying each day for a year has just gone up from $3.50 to $4.00 - same old bus service ... getting on and off at the same stops. No improvement just a 14% increase. What option did I have but to fork out the $0.50? I guess they had me over a barrel.

Prices change but the analogy is not correct.
When I suggested that charging $500 for a $380 product a better bus analogy would be
There are 2 buses to you destination.
One is nice warm and modern and costs $4
The other is rickety, breezy and will hopefully get you there but they are also charging $4. It used to cost $3.50 but since the better bus is full (so you can't get on) they have you over a barrel - walk or pay $4 for a $3.50 value bus.
When the provider puts a 3rd bus on the service the shit bus will have to go back to charging $3.50 to attract customers.

[Don't believe the Hype]

What does annoy me is people who charge $500 for the $380 product - but that is the problem with the market.
There aren't enough options in some places and people can charge more than a place should be worth.
Willing seller and not so willing, over a barrel, buyer.

I hate this too... you coukdn’t imagine how enraged I was yesterday to find that the bus ticket I’d been buying each day for a year has just gone up from $3.50 to $4.00 - same old bus service ... getting on and off at the same stops. No improvement just a 14% increase. What option did I have but to fork out the $0.50? I guess they had me over a barrel.

[Don't believe the Hype]

Very true - whether it needs doing or not is irrelevant.
You now have a better products to sell so should get a better price.

I have a house that was renting for $380/wk
I spent a few months doing it up, nothing really fancy but nice and tidy.
Bathroom, kitchen, painting, floor coverings.
$30k later rent is now $500/wk.

The house will be no warmer (was already insulated) but is now more expensive and a cheaper option for someone is now gone.

Interesting that the one item of value is warmer. It is an important benefit to some - but not all - and it comes at a cost as you rightly point out. There are many benefits that people are prepared to pay for.

What is a really interesting human behavior is that the majority tend to lean towards pretty and new over more practical options. Until insulation and heating became a huge topic of discussion recently you would likely have gotten more of a rent increase for new carpet than insulation.

[McDuck]

That is the market. .

This is where most monkeys get it wrong.


They don't understand what it takes to make a market place.

First you need a big wall, and a king to keep out the wild things and other kings.

Then you need a set of rules that work for all the monkeys.

The rules make sure the city functions in peace and order.

The king gets a cut, to pay his scribe monkeys and police monkeys and builder monkeys.

Once that nice stable environment is formed, then and only then may you may have a marketplace.


Stupid monkeys only see the tables and the fruit and nuts being swapped.


The king monkey knows its all required to allow the market to work, and for the monkeys to keep what they swap, and their lives.

[artemis]

......
What does annoy me is people who charge $500 for the $380 product - but that is the problem with the market.
There aren't enough options in some places and people can charge more than a place should be worth.
Willing seller and not so willing, over a barrel, buyer.

That is the market. People usually prefer to make money rather than lose it, oddly enough. Maybe that is the real problem with the market.

Not enough options? Quite likely. Did I mention most people are not keen on losing money?

In the real world, of NZ cities anyway, there are hundreds of rental vacancies. Some don't rent them because they can't - not enough income, poor tenancy or credit record.... Others rent them because they can and want to.

[Keys]

Willing seller and not so willing, over a barrel, buyer.

Sounds like an auction to me.

[Wayne]

yep... I more or less did that in may this year. Took a run down 3br unit, internal & external paint new roof and added a bedroom, took the rent from $280 to $450.

why would’t I charge more for an improved house - the fact it needed doing is irrelevant.

Very true - whether it needs doing or not is irrelevant.
You now have a better products to sell so should get a better price.

I have a house that was renting for $380/wk
I spent a few months doing it up, nothing really fancy but nice and tidy.
Bathroom, kitchen, painting, floor coverings.
$30k later rent is now $500/wk.

The house will be no warmer (was already insulated) but is now more expensive and a cheaper option for someone is now gone.

This will be a consequence, overall, of the desire to increase the quality of the housing stock.
What does annoy me is people who charge $500 for the $380 product - but that is the problem with the market.
There aren't enough options in some places and people can charge more than a place should be worth.
Willing seller and not so willing, over a barrel, buyer.

[McDuck]

yep... I more or less did that in may this year. Took a run down 3br unit, internal & external paint new roof and added a bedroom, took the rent from $280 to $450.

why would’t I charge more for an improved house - the fact it needed doing is irrelevant.

There are many reasons you might not increase the rent.

You might get an emotional payoff instead.

for example, you might rent it really cheaply to a member of your family.

Or you might have lots of money and want to help a young couple get out of the debt trap.


lots and lots of reasons.


the question is, how much could you charge and get away with?

What is the final factor that sets the ceiling?

[McDuck]

carpet should be amortised over 5 - 6 years, (expected life in a rental, despite normally being good for 10 -15 in PPOR !!)
Roof amortised over what - 20 -30 years ?
so not 150 pw, maybe 50 pw
but the point is still valid - repair / upgrade costs should not be attempted to be recovered directly from tenant in the short term, they should be capitalised and recovered over their expected life - thats what depreciation is /was when we had it !.

Claps.

Hands banana to fellow monkey, and has hopes for the future of the species.

[Don't believe the Hype]

carpet should be amortised over 5 - 6 years, (expected life in a rental, despite normally being good for 10 -15 in PPOR !!)
Roof amortised over what - 20 -30 years ?
so not 150 pw, maybe 50 pw
but the point is still valid - repair / upgrade costs should not be attempted to be recovered directly from tenant in the short term, they should be capitalised and recovered over their expected life - thats what depreciation is /was when we had it !.

you’re right, they took depreciation away and look who pays.

[Don't believe the Hype]

What if it hadn't been the carpet that needed replacing, but the roof? Would the market have withstood a, say, $150 rent increase?

yep... I more or less did that in may this year. Took a run down 3br unit, internal & external paint new roof and added a bedroom, took the rent from $280 to $450.

why would’t I charge more for an improved house - the fact it needed doing is irrelevant.

[Keithw]

carpet should be amortised over 5 - 6 years, (expected life in a rental, despite normally being good for 10 -15 in PPOR !!)
Roof amortised over what - 20 -30 years ?
so not 150 pw, maybe 50 pw
but the point is still valid - repair / upgrade costs should not be attempted to be recovered directly from tenant in the short term, they should be capitalised and recovered over their expected life - thats what depreciation is /was when we had it !.