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Labour Government and Property Management in New Zealand

David Faulkner
David Faulkner

In this forty minute webinar, Real iQ industry expert David Faulkner shares his opinions about how a new Labour lead coalition government will impact the Property Management industry in New Zealand and what type of an effect the Letting Fee ban will have on the industry.

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Changes in Legislation: What a labour coalition could mean for Investors and Property Management
Agenda Background The Healthy Homes Guarantee Bill The removal of Tenant Fees The Rental Warrant of Fitness Osaki Case Regulation
Housing is Labours top priority
What Labour is promising Ban foreign speculators from buying existing homes Tax property speculators who flick houses within five years Stop loopholes around negative gearing Build 100,000 affordable homes over 10 years 50% of this will be in Auckland Launch an Affordable Housing Authority Introduce the Healthy Homes Guarantee Bill Pledged to make life better for renters
Owner Occupied Rented Provided Free
Healthy Homes Guarantee Bill Volume 1 introduced by Phil Twyford, October 2013 Volume 2 introduced by Andrew Little in October 2015 Passed first reading by 1 vote May 2016 Coming up to Final Reading Expect the Bill to be passed within first 100 days
Why is in the Bill so important? This bill sets standards to ensure that every rental home meets standards of heating and insulation There is no guidance on standards around warm, dry homes Tenants will have the ability to ensure the property can meet a specific temperature There will be standards around drainage and ventalation
18 CWorld Health Organisation recommended minimum indoor temperature
17.8 CAverage indoor temperature in the winter Some where as low as 10 C Source: BRANZ RESEARCH
The Ban of the Letting Fee
Units per Office (109 offices) Less than 100 36% 101 to 200 19% 201 to 400 20% 401 to 600 15% 601 to 800 6% 1000+ 4% 55% of offices have less than 200 managements
Its Going To Hurt Sample Size of nearly 12,000 units Managed by 25 companies Smallest 130 to largest 3300 Average Letting fee 11.8% total revenue Highest 22.9% Lowest 7.08% Median 14.99%
Whats happening in the UK?
Whats happening in the UK? ENGLAND AND WALES Average Letting Fee $790 % of Total Revenue 20% of Total Revenue Total Revenue $1.34 Billion People employed in industry 58,000 Jobs in Jeopardy if industry absorbs 16,000 or 27.5% Jobs in Jeopardy if landlord absorbs 4,000 or 6.9% Average length of a tenancy 2.5 years Average annual fees paid by tenant $528 Average annual rent $18,436 % of income spent on rent 40% Report from ARLA (Association of Residential Letting Agents)
What We Are Saying At least 30% of companies at risk Bigger rent rolls may absorb the cost More companies will look to sell Capital asset of company may drop Bigger rent rolls will gobble up small ones Profit margins are slashed
Impact of the Ban Positive 1. Get rid of the cowboys 2. No more cheap fees 3. Increase in innovation 4. Development in new services 5. More focus on long term tenancies 6. Overall the standard will improve as more of a focus on service Negative 1. Jobs may go 2. Standards may drop as PMs forced to manage more 3. Landlords may go DIY 4. Over half the profit margin will be wiped out 5. Some companies may get desperate, increase in fraud 6. Companies forced to close
What We Are Recommending Look at revenue breakdown Maximise income from other sources Do not absorb the fee One Size Fits All letting fee for owners Review rents Develop new packages and services Project Management Landlord paid advertising Tribunal attendance fee Buyers agent Annualised budget for income and expenditure
Get What Is Due WITH LETTING FEE 500 PROPERTIES WITHOUT 500 PROPERTIES Management Fee $739,500 Management Fee $803,250 Letting Fee $80,000 Letting Fee - Maintenance Fee @ 5% $37,500 Maintenance Fee @ 7.5% $56,250 Inspection Fee @ $40 $70,000 Inspection Fee @ $45 $78,750 Marketing Fee - Marketing Fee @ $295 $59,000 Other Fees $5,000 Other Fees $20,000 TOTAL $932,000 TOTAL $1,017,250 Annual Rent Collected $10,200,000 Annual Rent Collected $10,710,000 Average Rent $400 Average Rent $420 Average Management Fee 7.25% Average Management Fee 7.5%
Warrant of Fitness Developed by University of Otago Wellington City Council first to implement it Voluntary in home assessment Gives landlords chance to promote their property 63 questions covering 29 criteria $250 cost to landlord
Housing Warrant of Fitness Assessment Manual August 2017 Version 3.0 1 Housing Warrant of Fitness (WOF) Assessment Manual Version 3.0 Version 3.0 息 NZGBC and University of Otago 2017 P F Kitchen Wall, ceiling and floor linings intact Surfaces clear of mould Functioning stove and oven Effective ventilation to the outside + Opening window with secure latch + Window security stays (where required) Adequate food preparation and storage Hot water at tap (55属C賊5属C) Potable water supply Waste water drainage with sound connection Working artificial lighting Visibly safe power outlets and light switches P F Living Areas Wall, ceiling and floor linings intact Surfaces clear of mould Effective ventilation to the outside + Opening window with secure latch + Window security stays (where required) Working artificial lighting Heating, fixed, effective and safe Visibly safe power outlets and light switches Curtains/blinds/double glazing present P F Bathroom and Toilet Wall, ceiling and floor linings intact Surfaces clear of mould Operational toilet Sewage connection functional Functioning bath or shower Effective ventilation to the outside + Opening window with secure latch + Window security stays (where required) Waste water drain connected Hot water at tap (55属C賊5属C) if second cylinder Visibly safe power outlets and light switches Working artificial lighting P F Laundry Wall, ceiling and floor linings intact Surfaces clear of mould Effective ventilation to the outside Working artificial lighting Waste water drain connected Visibly safe power outlets and light switches Assessment Checklist P = Pass F = Fail / = Not applicable 1 2 3 4 5 Bedrooms PF PF PF PF PF Wall, ceiling and floor linings intact Surfaces clear of mould Effective ventilation to the outside + Opening window with secure latch + Window security stays (if required) Visibly safe power and light switches Smoke alarm within 3m Curtains/blinds/double glazing P F Entrance Address clearly labelled and identifiable Securely locking doors Working light P F Ceiling Insulation Insulation to requirements (120mm)* No gaps, tucks, or folds No dampness in insulation Clearance for lights, ducts and roof P F Underfloor Insulation Insulation to requirements* Dry underfloor Ground vapour barrier No ponding P F General No cracks, holes in roof No cracks, holes in external cladding No cracks, holes or missing panes in windows Spouting, storm/waste water functioning, no leaks Structurally sound Glass doors made of safety glass or include visibility strips Handrails and balustrades to code* Non-potable water labelled Paths, decks and surfaces non-slippery/free from moss Secure storage (1.2m high or child-free lock) Artificial lighting other P F Hallway/stairwell Wall, ceiling and floor linings intact Surfaces clear of mould Visibly safe power outlets and light switches Opening window with secure latch Window security stays (if required) Artificial lighting - hallway Artificial lighting - stairs *Manual at https://tinyurl.com/RHWoFManual (PDF) Totals Pass Fail READY TO BOOK YOUR INDEPENDENT ACCREDITED INSPECTION? Phone: 0508 78 78 24 (The Sustainability Trust) How Many Houses Will Fail
Whats Happened in Wellington? Two landlords have done it One appeared on front page of Dominion Post complaining about it Pass 28 but fail 1, youve failed Criteria too Nanny State Our opinion, will never take off in current format Adapt European Style Energy Performance Certification (EPC)
The Osaki Case Being address in the Residential Tenancies Amendment Bill Vol.2 Still likely to go through Labour voted in favour of it Worse case: Delay in bill being passed Best case: Push it through as they voted for it anyway No change here
Time for Regulation? 381 answered 293 yes 52 no 36 not sure
Who is Lobby the Government?
Labour Government and Property Management in New Zealand
#getpmqualified
Thank You For assistance email getqualified@realiq.nz Call Real iQ on 04 473 2547 www.realiq.nz

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Labour Government and Property Management in New Zealand

  • 1. Changes in Legislation: What a labour coalition could mean for Investors and Property Management
  • 2. Agenda Background The Healthy Homes Guarantee Bill The removal of Tenant Fees The Rental Warrant of Fitness Osaki Case Regulation
  • 4. What Labour is promising Ban foreign speculators from buying existing homes Tax property speculators who flick houses within five years Stop loopholes around negative gearing Build 100,000 affordable homes over 10 years 50% of this will be in Auckland Launch an Affordable Housing Authority Introduce the Healthy Homes Guarantee Bill Pledged to make life better for renters
  • 6. Healthy Homes Guarantee Bill Volume 1 introduced by Phil Twyford, October 2013 Volume 2 introduced by Andrew Little in October 2015 Passed first reading by 1 vote May 2016 Coming up to Final Reading Expect the Bill to be passed within first 100 days
  • 7. Why is in the Bill so important? This bill sets standards to ensure that every rental home meets standards of heating and insulation There is no guidance on standards around warm, dry homes Tenants will have the ability to ensure the property can meet a specific temperature There will be standards around drainage and ventalation
  • 8. 18 CWorld Health Organisation recommended minimum indoor temperature
  • 9. 17.8 CAverage indoor temperature in the winter Some where as low as 10 C Source: BRANZ RESEARCH
  • 10. The Ban of the Letting Fee
  • 11. Units per Office (109 offices) Less than 100 36% 101 to 200 19% 201 to 400 20% 401 to 600 15% 601 to 800 6% 1000+ 4% 55% of offices have less than 200 managements
  • 12. Its Going To Hurt Sample Size of nearly 12,000 units Managed by 25 companies Smallest 130 to largest 3300 Average Letting fee 11.8% total revenue Highest 22.9% Lowest 7.08% Median 14.99%
  • 14. Whats happening in the UK? ENGLAND AND WALES Average Letting Fee $790 % of Total Revenue 20% of Total Revenue Total Revenue $1.34 Billion People employed in industry 58,000 Jobs in Jeopardy if industry absorbs 16,000 or 27.5% Jobs in Jeopardy if landlord absorbs 4,000 or 6.9% Average length of a tenancy 2.5 years Average annual fees paid by tenant $528 Average annual rent $18,436 % of income spent on rent 40% Report from ARLA (Association of Residential Letting Agents)
  • 15. What We Are Saying At least 30% of companies at risk Bigger rent rolls may absorb the cost More companies will look to sell Capital asset of company may drop Bigger rent rolls will gobble up small ones Profit margins are slashed
  • 16. Impact of the Ban Positive 1. Get rid of the cowboys 2. No more cheap fees 3. Increase in innovation 4. Development in new services 5. More focus on long term tenancies 6. Overall the standard will improve as more of a focus on service Negative 1. Jobs may go 2. Standards may drop as PMs forced to manage more 3. Landlords may go DIY 4. Over half the profit margin will be wiped out 5. Some companies may get desperate, increase in fraud 6. Companies forced to close
  • 17. What We Are Recommending Look at revenue breakdown Maximise income from other sources Do not absorb the fee One Size Fits All letting fee for owners Review rents Develop new packages and services Project Management Landlord paid advertising Tribunal attendance fee Buyers agent Annualised budget for income and expenditure
  • 18. Get What Is Due WITH LETTING FEE 500 PROPERTIES WITHOUT 500 PROPERTIES Management Fee $739,500 Management Fee $803,250 Letting Fee $80,000 Letting Fee - Maintenance Fee @ 5% $37,500 Maintenance Fee @ 7.5% $56,250 Inspection Fee @ $40 $70,000 Inspection Fee @ $45 $78,750 Marketing Fee - Marketing Fee @ $295 $59,000 Other Fees $5,000 Other Fees $20,000 TOTAL $932,000 TOTAL $1,017,250 Annual Rent Collected $10,200,000 Annual Rent Collected $10,710,000 Average Rent $400 Average Rent $420 Average Management Fee 7.25% Average Management Fee 7.5%
  • 19. Warrant of Fitness Developed by University of Otago Wellington City Council first to implement it Voluntary in home assessment Gives landlords chance to promote their property 63 questions covering 29 criteria $250 cost to landlord
  • 20. Housing Warrant of Fitness Assessment Manual August 2017 Version 3.0 1 Housing Warrant of Fitness (WOF) Assessment Manual Version 3.0 Version 3.0 息 NZGBC and University of Otago 2017 P F Kitchen Wall, ceiling and floor linings intact Surfaces clear of mould Functioning stove and oven Effective ventilation to the outside + Opening window with secure latch + Window security stays (where required) Adequate food preparation and storage Hot water at tap (55属C賊5属C) Potable water supply Waste water drainage with sound connection Working artificial lighting Visibly safe power outlets and light switches P F Living Areas Wall, ceiling and floor linings intact Surfaces clear of mould Effective ventilation to the outside + Opening window with secure latch + Window security stays (where required) Working artificial lighting Heating, fixed, effective and safe Visibly safe power outlets and light switches Curtains/blinds/double glazing present P F Bathroom and Toilet Wall, ceiling and floor linings intact Surfaces clear of mould Operational toilet Sewage connection functional Functioning bath or shower Effective ventilation to the outside + Opening window with secure latch + Window security stays (where required) Waste water drain connected Hot water at tap (55属C賊5属C) if second cylinder Visibly safe power outlets and light switches Working artificial lighting P F Laundry Wall, ceiling and floor linings intact Surfaces clear of mould Effective ventilation to the outside Working artificial lighting Waste water drain connected Visibly safe power outlets and light switches Assessment Checklist P = Pass F = Fail / = Not applicable 1 2 3 4 5 Bedrooms PF PF PF PF PF Wall, ceiling and floor linings intact Surfaces clear of mould Effective ventilation to the outside + Opening window with secure latch + Window security stays (if required) Visibly safe power and light switches Smoke alarm within 3m Curtains/blinds/double glazing P F Entrance Address clearly labelled and identifiable Securely locking doors Working light P F Ceiling Insulation Insulation to requirements (120mm)* No gaps, tucks, or folds No dampness in insulation Clearance for lights, ducts and roof P F Underfloor Insulation Insulation to requirements* Dry underfloor Ground vapour barrier No ponding P F General No cracks, holes in roof No cracks, holes in external cladding No cracks, holes or missing panes in windows Spouting, storm/waste water functioning, no leaks Structurally sound Glass doors made of safety glass or include visibility strips Handrails and balustrades to code* Non-potable water labelled Paths, decks and surfaces non-slippery/free from moss Secure storage (1.2m high or child-free lock) Artificial lighting other P F Hallway/stairwell Wall, ceiling and floor linings intact Surfaces clear of mould Visibly safe power outlets and light switches Opening window with secure latch Window security stays (if required) Artificial lighting - hallway Artificial lighting - stairs *Manual at https://tinyurl.com/RHWoFManual (PDF) Totals Pass Fail READY TO BOOK YOUR INDEPENDENT ACCREDITED INSPECTION? Phone: 0508 78 78 24 (The Sustainability Trust) How Many Houses Will Fail
  • 21. Whats Happened in Wellington? Two landlords have done it One appeared on front page of Dominion Post complaining about it Pass 28 but fail 1, youve failed Criteria too Nanny State Our opinion, will never take off in current format Adapt European Style Energy Performance Certification (EPC)
  • 22. The Osaki Case Being address in the Residential Tenancies Amendment Bill Vol.2 Still likely to go through Labour voted in favour of it Worse case: Delay in bill being passed Best case: Push it through as they voted for it anyway No change here
  • 23. Time for Regulation? 381 answered 293 yes 52 no 36 not sure
  • 24. Who is Lobby the Government?
  • 27. Thank You For assistance email getqualified@realiq.nz Call Real iQ on 04 473 2547 www.realiq.nz