Growing numbers of mum and dad investors are looking to ditch their property investments on the back of tougher landlord conditions, according to the boss of a peer to peer mortgage lender.
Luke Jackson, chief executive of Southern Cross Partners, says small-time landlords are feeling the pressure from bank loan restrictions, changes to the Healthy Homes Guarantee Act 2017 and fears of how methamphetamine contamination could ruin their retirement planning.
"The feedback we're getting is that small mum and pop property investors are becoming increasingly uncomfortable with the title landlord and the increased liabilities and obligations that this carries – they are in it to build a small nest egg for retirement.
Jackson said there was growing concerns around the costs landlords face to make their investment properties compliant with new legislation.
"They've heard a number of promises to tenants from the new Labour Government – particularly the promise to increase the no-reason 90-day notice to 180 days.
"Coupled with this are horror stories about methamphetamine use in New Zealand and the devastating cost it can visit on a landlord."
Jackson said while many of the changes may result in rent increases, rental yields aren't expected to change.
Reserve Bank restrictions on bank lending to property investors have eased this month with the equity requirement dropping from 40 per cent to 35 per cent.
But Jackson said even with the easing it was an investment that still tied up more capital than was historically the norm.
"Previously, investors could recoup this with strong capital gains, but with a slowing property market investors are now unsure if any net gain will be realised.
"Coupled with low and stagnating rental yields, property investment is losing its shine for many."
Jackson's view comes on the back of a property investors survey which found landlords welcome longer-term tenancies but are cautious about other proposed changes to tenancy law.
The research by the Auckland Property Investors' Association polled more than 500 active Auckland landlords about the extent to which they expected to be affected by various proposals related to the residential tenancy market.
Landlords across the board responded favourably towards the relaxation of loan-to-value restrictions, better security of tenure through longer-term tenancies and the Healthy Homes Guarantee Act, the association said.
The survey found that landlords were most concerned about the prospects of a capital gains tax, debt-to-income restriction, and the removal of the 42-day notice to terminate.