Tauranga landlords are selling up amid tough new housing regulations but the scenario has created opportunities for new investors or those who want to build up existing portfolios, experts say.
Nationally, the New Zealand Property Investors Federation says 1400 of its 7000 landlords could exit the industry and Tauranga Property Investors Association president Juli Tolley says "I've been watching long-term investors sell up for the last six months and it is increasing".
"More are asking about how to move into commercial investments."
Tolley hoped the generation of young new investors she was also seeing "will provide some balance, not all, but some".
Current returns in Tauranga were low and averaged about 3 to 5 per cent and the numbers had to work.
"Rents must cover the costs ... fewer investors rely on capital gains these days because cash flow is the most important aspect of running any type of business."
The new compliance requirements introduced over the past three years, including the removal of the no-cause 90-day notice had caused big impacts, she said.
"The real challenge with the removal of the no cause is how to protect connected tenants, neighbours, or staff from abusive situations where tenants have no regard for others. The legislation introduced is very prescriptive and restrictive.
"Anyone managing a property is grappling with developing strategies on how to protect their good tenants or neighbours from the odd case where you have problems. I've just heard of a situation where one of the gangs has moved into a new neighbourhood where homeowners have bought their dream homes as well as a few investors with long-term tenants.
"The police are there just about every week."
Tauranga Rentals owner Dan Lusby said it was also getting some kickback from landlords that "it is getting too hard".
"Fortunately, we take care of all that stuff for them but for clients where we only find tenants for them are saying we have had enough and are going to get out."
The cost of installation and heating alone could cost $10,000 to $20,000, while he was aware of one landlord forking out more than $15,000 to decontaminate and refurbish a property because the tenants were on meth.
On the flipside, new investors were stepping to the fore but were looking at buying new builds which met all the Government specifications.
Harcourts Advantage Realty Tauranga managing director and business owner Nigel Martin said with "interest rates picked to go lower over the next 12 months, returns on investment properties will become more attractive".
"If any investors are wanting to sell, there will be plenty of buyers looking to enter the investment property market and become a landlord."
Martin said investment properties provide a good long-term return on investment, especially when you compare this to putting money in the bank.
But changes to the 90-day rules meant the tenant vetting process from property managers would become more important than ever to ensure good tenants were placed in landlords properties.
"This is going to make it harder for those tenants who don't have good references."
Meanwhile, the number of rental properties available in Tauranga was still "historically low".
Simon Anderson, managing director of Realty Group, which operates Eves and Bayleys, said there was a new wave of local and Auckland investors who were looking at the Tauranga market "with fresh eyes".
Yields in the city were typically 4 to 4.5 per cent and the new investors were coming in "with an understanding of the new legislation".
The older investors were "over it and ... have been slowly worn down".
Anderson said its property managers were experiencing high demand for properties, and most were receiving at least 30 applicants.
Tremains Tauranga business development manager Shonagh Harris agreed the landscape had changed for landlords but its rental portfolio was growing.
It was too early to tell what the full impact of the new regulations would be, although the company had seen "a few owners go to the sales market".
"I think most owners still see owning a rental property a great investment when managed right. What we have seen though is landlords with one property returning to live in that property due to Covid-19 – either because they want to return to the safe haven of Bay of Plenty or having had job opportunities overseas not go ahead."
In some cases, new landlords were also leaning towards new builds.
"However, in general, It's more from an individual's viewpoint whether they prefer new builds or older properties. We have some excellent older properties which are also in great locations so they can become very sought-after investments."
New Zealand Property Investors' Federation executive officer Sharon Cullwick said it expected that about 20 per cent of rental property owners would leave the industry because of an over-regulated market.
She estimated close to 17,000 were on the state housing waiting list.
"This list will now continue to rapidly increase as tenants without impeccable tenancy records find it challenging to rent a property from private rental property owners."
Ministry of Housing and Urban Development quarterly figures show in the Bay of Plenty there were 1327 applicants waiting for public housing to the end of June compared to 1215 to March 31.
Over the same timeframes, emergency housing providers in the region were paid $8.5 million compared to $6m to March 31.
Trade Me figures show the median June rent in Tauranga was $540 and $20 more than the same time last year.