Gov't Moves on Unruly Tenants, DTIs Need Deeper Analysis & Prices Rising AT Double Speed

“The Week in Review”  is where we talk about current events for the everyday investor and homebuyer.

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THIS WEEK IN REVIEW TOPICS:
Topic #1: NZ Herald 19th of March -Kāinga Ora crackdown: Greens decry ‘politics of punishment’, neighbours celebrate as Government moves on unruly tenants

Topic #2: Oneroof 19th of March -When house sales turn toxic: Why real estate agents fire their vendors

Topic #3: The Mortgage Mag 18th of March- Activating DTIs and loosening LVRs

Topic #4: Good Returns 20th of March- DTIs need deeper analysis

Topic #5: Oneroof 18th of March -Seven straight months of rent hikes: Prices rising at double the speed

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Transcript

 

Hi everyone, I'm Debbie Roberts, owner and financial advisor at Property Apprentice. Join us today for the week in review where I talk about current events for the everyday investor and home buyer. 

 Our topics for this week. Topic number one from the New Zealand Herald on the 19th of March:  📍 Kainga Ora crackdown. Greens decry politics of punishment. Neighbours celebrate as government moves on unruly tenants. Topic number two from Oneroof on  📍 the 19th of March. When house sales turn toxic, why real estate agents fire their vendors? 

 📍 Third topic from the Mortgage Mag on 18th of March, activating DTIs and loosening LBRs.  📍 Fourth topic from Good Returns on the 20th of March, DTIs need deeper analysis. And  📍 topic number five from OneRoof on the 18th of March, seven straight months of rent hikes, prices rising at double the speed. 

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First up this week in review from the New Zealand Herald on the 19th of March, Kāinga Ora crackdown:

greens decry politics of punishment. Neighbours celebrate as government moves on unruly tenants. The Green Party has accused the government of engaging in what it terms politics of punishment regarding its stance on dealing with antisocial behaviour amongst Kāinga Ora tenants. Conversely, entities such as an Auckland Business Association, a neighbour who encountered aggression from a Kainga or a tenant, and a lawyer assisting affected residents have lauded the decision, considering evictions as a positive step.

Additionally, the ACT Party has expressed satisfaction reviewing the move as a necessary deterrent against malicious behaviour, in line with one of its conditions outlined in the coalition agreement with National. Prime Minister Christopher Luxon and Housing Minister Chris Bishop announced the termination of Kāianga Ora's Sustaining Tenancies Framework, citing instances of severe antisocial behaviour exhibited by certain tenants. 

Despite concerns about the potential risk of homelessness, the decision aims to address safety issues and prioritise housing for families on waitlists.  The move has evoked mixed reactions, with some expressing opposition due to fears of unjust consequences for vulnerable groups, while others have supported it, emphasising the urgency of curbing disruptive behaviour in state housing.

Various stakeholders have articulated differing views on the government's decision. While the Green Party has criticised it as punitive, the ACT Party and affected communities have welcomed it as a necessary measure to ensure safety and effectively address antisocial behaviour. The discourse underscores the complex balance between providing social housing and managing tenant conduct, with implications for community safety and housing availability. 

My opinion on this is,  this is a way of protecting the community. If there's an unruly tenant in Kainga Ora and they're causing major safety concerns for their neighbours and the neighbouring, you know, Kāianga Ora tenants in their housing development as well, then why does that unruly tenant have the right to stay there? 

When others might not have a choice about where they live. So,  at the end of the day, it's not going to be a surprise to anyone when they get evicted. There's periods that you have to go through to  give them notice for antisocial behavior, and they've got to stop it.  It's not going to be a surprise.

Someone's not suddenly going to find themselves homeless. They've got time to turn themselves around and get their act together. So if they end up homeless because they can't follow the rules of like living like decent human beings, then I completely agree they should lose the right to having housing provided for them by the state. 

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Second topic from Oneroof on the 19th of March, when house sales turn toxic, why real estate agents fire their vendors? Homeowners have the power to hire real estate agents, but the relationship can sour due to micromanagement, mistrust, or unrealistic expectations leading to termination. In a sluggish market, this tends to occur more frequently as properties become harder to sell.

Tom Rawson from Ray White Manukau notes instances of mutual termination between agents and vendors, especially when vendors seek unattainable prices. Recently, his agency parted ways with a client who micromanaged due to market shifts, altering listings and futile attempts to boost prices. While the standard contract is 90 days, exclusive contracts can be terminated by mutual agreement.

Experienced agents are cautious about difficult clients as they can be time consuming and detrimental to business.  Christchurch agent Caleb Griffioen recounts declining a listing due to a misalignment in expectations and reluctance to follow advice. He emphasizes the importance of a good fit between the agent and the client.

Legal contract termination is rare unless there are significant breaches or relationship breakdowns. However, parties often see out the 90- day term before deciding against renewal. In Auckland, an unnamed agent mentions parting with clients over unrealistic price expectations, which is a common issue in stagnant markets.

Overpromising can backfire, leading agents to opt for early termination to maintain credibility and avoid  compromising situations.  Agents are legally limited in terminating contracts unilaterally, except in cases of non disclosure. Management intervention may be necessary in some toxic relationships, though.

Ultimately, agents prioritise their contracts. Professionalism and alignment with client expectations for successful partnerships. And at the end of the day, if you're engaging with a real estate agent to sell your property, you should rely on their professionalism to get the job done. If they've got more experience in selling property than you have, then my advice would be to listen to the recommendations, but just make sure you've picked a good agent to begin with.

  📍 If you'd like to learn more about investing in property, join me at one of our free events called "How to Succeed with Property Investing". I'll discuss strategies for successful investing from my perspective as a financial advisor, available live, online or in person. Check out www.propertyapprentice.co.Nz for upcoming dates and register today.

 We don't sell property, so it's all about increasing   📍 your knowledge to reduce your risk. If you've already been to one of our free events and you'd like to find out more about how we can help you to reach your financial goals, you can also book a no obligation phone call or meeting with my husband Paul Roberts via the website.

It's www.propertyapprentice.co.Nz.   

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Third topic for this week in review from the Mortgage Mag on the 18th of March, activating DTIs and loosening LVRs. The New Zealand Banking Association, the NZBA, urges the Reserve Bank to relax proposed debt to income restrictions, or DTI restrictions, due to banks internal conservatism.

They propose setting a higher DTI limit of at least 25% for borrowers and increasing the speed limit to 30% to accommodate bank conservatism in complex lending scenarios.

Although previously opposed, the NZBA now supports DTIs but emphasises the need for loosening loan-to-value ratios for investors. They advocate for clear public education on the DTI framework to dispel misconceptions and maintain confidence in the banking system. Further clarification is needed on specific points, including banks discretion in lending under DTI settings, and the use of historical data for DTI calculations.

The Reserve Bank of New Zealand, the RBNZ, is expected to make a final decision on DTI implementation in June, with enforcement possibly starting in July.  The NZBA suggests a practical six month regulatory measurement window to adapt to the new framework. The NZBA also highlights challenges posed by proposed changes to the Credit Contracts and Consumer Finance Act, or the CCCFA,  urging coordination between regulatory changes to mitigate confusion for lenders and consumers.

 

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Fourth topic for this week in review from Good Returns on the 20th of March, DTIs need deeper analysis. The Business New Zealand Group opposes the Reserve Bank's proposed debt-to-income restrictions, emphasising that banks already have robust commercial incentives to stress test loans and minimise defaults.

They argue that DTIs overlook various factors crucial in assessing borrowers creditworthiness,  such as individual circumstances and other assets.  Stress tests conducted by the Reserve Bank have consistently shown bank's resilience to severe economic shocks. The group believes that addressing property price concerns falls outside of the Reserve Bank's mandate. 

They suggest alternative policies such as increasing urban land allocation, bolstering the construction sector, easing building code regulations, and adjusting immigration levels. Geoff Mortlock, a former Reserve Bank senior employee, also advocates for policies beyond the Reserve Bank's scope, such as land use planning and immigration controls.

Business New Zealand suggests that targeting only banks with DTI requirements may incentivize lending in less regulated sectors, posing potential inequities. 

. The group recommends setting DTIs at levels binding during economic booms, but flexible and normal times to minimise immediate disruptions. In conclusion, Business New Zealand calls for a thorough analysis of the Reserve Bank's proposals, emphasising the need to balance regulatory measures with their potential impact on various groups in the broader economy.

They also stress the importance of public education and transparency regarding the rationale and implications of the DTIs. 

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 Fifth topic for this week in review from Oneroof on the 18th of March, seven straight months of rent hikes, prices rising at double the speed. Here are five key insights into the housing market from CoreLogic's Chief Economist, Kelvin Davidson.

Rapid rent increases. Rents for new tenancies have risen by 6 percent in the year to February, marking the seventh consecutive month of growth at double the long term average. Median rents have risen even faster than that, by closer to 9%. While rising wages contribute to this trend, high demand for rental properties and limited supply also play significant roles.

Although rental growth may eventually slow due to already high rent levels compared to incomes, momentum is expected to persist for now.  Net migration trends. While net migration may have peaked, it remains high with a 12-month total of 133, 836 and 5, 259 in January alone. Now just to clarify, net migration is the number of people more that have come into New Zealand than have left.

Although these numbers are slightly lower than before, they continue to drive overall property demand, particularly in the rental market. Because as my husband Paul says, No one gets off a plane and buys a house straight away.  First time buyer activity is another one. First time buyer activity has shown signs of easing dropping from over 26% in late 2023 to 25 and a half percent in the first two months of 2024.

Conversely, multiple property owners, including investors, have shown increased activity. Still early to see the impact of the reinstatement of mortgage interest deductibility for investors, but other factors like mortgage rate decreases could play a bigger role. Also potentially the fact that there's a lot more properties on the market means that there's a lot more choice for property investors, so they can take their time and negotiate better deals potentially as well.

So yeah, so it's not a massive surprise that there are more investors coming into the market as well when there's so many houses on the market. 

Recovery spreading slowly. Median property values have shown signs of recovery, with nearly 60 percent of suburbs experiencing value increases since December. Parts of Auckland, Wellington and Queenstown, as well as some areas on the West Coast, have shown notable growth, possibly due to previous downturns, creating room for faster upturns. 

My recommendation would be to stay away from small towns with shrinking populations if you're looking for a good investment property for the long term. However, beautiful place to visit, and if you live there, obviously it's a good idea to buy a home at some stage as well.  GDP Insights, quarter four GDP data that was released this morning.

Oh, so I'll be able to do an instant update for you here.  So, what I was going to say was, Q4 GDP data to be released this week may show a slight increase, potentially avoiding a technical recession after a 0. 3 percent drop in Q3. However, the significance of this data may be limited as it reflects past economic conditions, which for many may still feel recessionary.

So, update, yep, we are definitely back in a technical recession with the second consecutive quarterly drop in GDP. So it wasn't a massive drop, but  certainly a decrease. 

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 Learning about property investing from someone who has no vested financial interest in the purchases that you're looking at buying is crucial, especially at a time when there's so many salespeople claiming to know the best strategy for you.

  📍 If you need help with making investment decisions based on objective information, attend our free event called How to Succeed with Property Investing. During these two hour workshops, I cover the most recent property market data, and what's more, as an experienced property investor and a financial advisor, I'll be sharing valuable insights and expert tips to help you on your journey. 

Our free events cater to all levels of property investors and first home buyers, and I'll also tell you more about how we help our clients to achieve their financial goals. So if you're interested in finding out more about what we do, visit www.propertyapprentice.co.Nz today to secure your spot and register for our events.

 Don't believe everything you read on the internet, because some of it's   downright lies.  Like, for example, there's one company out there that says that all we do is teach, buy, renovate, and hold. And that's not true at all.  There's someone else that says that we're only 12 months. That's not true.

It's   📍 a lifetime coaching support. So, you know, if you want to find out what we do. Come straight to the source and find the truth instead of listening to someone who might be talking us down for their own benefit.  All right, so feel free to book a no obligation phone call or meeting with my husband, Paul Roberts, as well through our website.

 Thanks for listening. See you again next week.