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  1. #1

    Default Legislation to ban letting fees

    Now that this is closer to being passed and possibly by end of 2018, what are the views on this?

    As is suggested it is likely that rents will go up to compensate for this.

  2. #2

    Default

    Property management fees will go up to compensate for this or they will charge for marketing... but many properties (the majority) are self-managed. I think rents will go up in general because they always do and we have a lot of cost pressures, the biggest of which is probably minimum wage increases.

    There is also likely to be a productivity bump as technology lowers the cost of letting in some as-yet unforseen way. Investors are likely to be far more value-to-cost conscious than renters (who were over a barrel really).
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  3. #3
    Join Date
    May 2004
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    Default

    A lot of rentals are managed by a property manager, over half according to the April regulatory impact statement from MBIE on banning letting fees:

    In 2017, of the total 175,081 bonds lodged, 53.6 per cent were lodged by property management companies and it is likely that a large proportion of them charged a letting fee.

    I would expect PM companies to charge landlords directly and landlords look to recover the amount from rent increases over a year or so. Also to charge tenants for actual costs in terms of s44 of the RTA.

    (Interested to hear from any PMs.)

    Possible unforeseen circs -

    If half of new rentals have a rent increase solely for this purpose, then the market rent moves for all landlords, including privately managed.

    If aiming to recover in a year or so, tenants who stay longer will carry on paying. A buffer for landlords at the very least.

    PMs may start charging tenants under s45, and I'm guessing most currently don't.

    Landlords get a tax deduction if paying a lump sum, though somewhat offset by increased rent over time. However, fiscal impact could be significant. Say 60,000 pay the PM a $500 lump sum in December to March, next peak letting season, talking tax deduction of tax on $30 mill plus GST in one hit. More over a whole year.

  4. #4
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    Default

    Quote Originally Posted by artemis View Post
    PMs may start charging tenants under s45, and I'm guessing most currently don't.
    We are starting to do that. The last one came in at over $845 for the tenant to break their lease. Now, tenants are definitely thinking twice about breaking leases. Three so far have enquired and changed their mind after the cost to break the contract is explained.

  5. #5

    Default

    Thanks for correcting me, I had thought about 30-35% were managed, can't remember where I heard that tho.

    Quote Originally Posted by artemis View Post
    A lot of rentals are managed by a property manager, over half according to the April regulatory impact statement from MBIE on banning letting fees:

    In 2017, of the total 175,081 bonds lodged, 53.6 per cent were lodged by property management companies and it is likely that a large proportion of them charged a letting fee.
    Free online Property Investment Course from iFindProperty, a residential investment property agency.

  6. #6
    Join Date
    Sep 2004
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    Hastings
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    Default

    Will this proposed legislation be separate? Or part of the proposed bundle of nefarious RTA reforms?
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  7. #7
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    Default

    ^^ Separate. Christmas present for tenants.

  8. #8
    Join Date
    Mar 2010
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    Lower Hutt
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    Default

    It'll be interesting to see what other agencies do and whether owners will swallow it; I've got mixed views with whether owners will swallow it.

    The good thing that will come out of it though is that cut price agencies will be forced to start charging higher fees to remain in business and be profitable and those cut price agencies that continue to operate under their usual low cutting fee structure will be forced out of business.

    Rents will go up....yes, that is a natural thing
    Fraser Wilkinson
    www.managemyrental.co.nz
    Wellington / Lower Hutt / Upper Hutt / Porirua

  9. #9
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    Jun 2004
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    Quote Originally Posted by FJW View Post
    It'll be interesting to see what other agencies do and whether owners will swallow it; I've got mixed views with whether owners will swallow it.

    The good thing that will come out of it though is that cut price agencies will be forced to start charging higher fees to remain in business and be profitable and those cut price agencies that continue to operate under their usual low cutting fee structure will be forced out of business.

    Rents will go up....yes, that is a natural thing
    If I was paying the letting fee I'd be taking a lot of notice of churn.
    It would depend, I suspect, on how many properties you have with a PM as to how they will charge you.
    Things are a lot more negotiable when you have a lot of properties with them.

  10. #10
    Join Date
    May 2007
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    Default

    I would only be prepared to pay if the tenancy was for a fixed term, of say at least 1 year. Similar to commercial where you pay an agent a fee to find you a good and suitable tenant.

    Ross
    More Profit from Property? TEACH ME MORE
    Ross Barnett - Coombe Smith Property Accountants
    Proud to give the best property advice for over 13 years.


 

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