Tauranga's rental market is likely to hold its own despite Covid-19, property experts say. Photo / File
Tauranga's rental market is likely to hold its own despite Covid-19, property experts say. Photo / File
Tenants living in one of New Zealand's hottest property markets and who are hoping for rent drops amid the Covid-19 crisis may be disappointed - with one real estate boss saying they will still have to pay the price of ''living in paradise''.
Experts agree supply and demand willdictate the market regardless of the impacts created by Covid-19 - and rents could continue to increase.
Tremains Northern Group chief executive Hayden Duncan said any agent or property manager that thought there would be any downward pricing on rental accommodation in the Bay of Plenty ''have got rocks in their head''.
''Anyone that's ever done any economics will understand the fundamental driver of anything is supply and demand. Affordability, unfortunately for rental properties is secondary.''
''The Bay of Plenty is like living in paradise at the moment... there are some challenges but there are certainly some opportunities even for those who have employment challenges.''
But he said the percentage of what people were paying for accommodation ''was a massive concern''.
''We are concerned because the more people can have reasonably priced accommodation in the tenancy market, the more that enables them to actually save and get into homeownership.''
Tauranga Rentals owner Dan Lusby. Photo /File
Tauranga Rentals owner Dan Lusby said it had been fielding queries from expats who planned to move home.
''We have had their friends and family contact us saying things, like my brother is coming back in June, have you got something for them?''
Those scenarios would put added pressure on the market, he said.
Prior to the lockdown some of landlords had opted to reduce rents because ''every day the house is empty it could cost them $70 a day''.
Luckily only a handful of tenants had failed to meet their rent, he said, as they were encouraged to be open about any changing circumstances so solutions could be sought.
Going forward Lusby said the Reserve Bank's decision to scrap loan-to-value restrictions would make getting on the property ladder more attractive for first-home buyers and that could also affect the number of rentals available.
''That will make it worse for us as there will be less supply and rents will inevitably start to rise again. We are in a bit of a catch-22 situation.''
OneRoof editor Owen Vaughan. Photo / File
OneRoof editor Owen Vaughan said the market was still in shock and areas that were highly reliant on tourism would be affected the most.
Some investors or holiday homeowners may have to sell or look at renting out properties long-term.
''They will have to make some tough decisions especially if they are under financial pressure.''
On the bright side the expectant influx of expats could provide a boost, he said.
Tauranga Property Investors Association president Juli Tolley said there was a lot of uncertainty at the moment for landlords.
Tauranga Property Investors Association president Juli Tolley. Photo / File
''Many established and experienced investors have balanced their portfolios to weather the storm, but new investors or circumstantial investors may be nervous because they may have more risk exposure and may not have built-in enough safeguards for drastic market changes.''
A large portion of landlords have jobs, financial obligations and families to take care of.
''So they are facing the same challenges as tenants of reduced hours, possible job losses, and a bit of panic on if their tenants can stay and continue paying rent to cover the property outgoings.''
Expats often also bought in overseas funds and tended to purchase at higher levels or build new, and until they build or buy, they need to rent, she said.
''We are already seeing a huge increase in demand in Tauranga with this lockdown easing up. There has been no dramatic increase in land being made available for new builds, so growth is somewhat stunted in that area.''
''This means there may be more competition for both rentals and residential sales.''
NZ Property Investors Federation chief executive Sharon Cullwick said most rental property providers do not own vast numbers of properties.
The average number was less than two, with 90 per cent of providers owning just one or two rentals to help them through retirement, she said.
A study by the federation shows study found that 59 per cent of providers have lost either part or all of their main income due to Covid-19.
Landlords had reduced the rent for five per cent of their tenancies and deferred rental payments for a further 1.5 per cent.
For landlords that lowered the rent, the average reduction was 43 per cent or $210 per week.
''Expenses, such as rates, insurance, repairs account for 30 per cent to 50 per cent of rental income before mortgage payments are even taken into account. Many landlords simply cannot afford not to have rent coming in.''
Meanwhile, Trademe Property spokesman Aaron Clancy said the average weekly median rent in Tauranga in March had jumped to $530 compared to $500 the same time last year.
It was too early to understand the full extent of how Covid-19 would impact the Bay of Plenty rental market but trends had started to emerge.
''In tourist centres - including Tauranga - we have seen an increase in the number of fully furnished rental properties come onto the market. This is because more investment properties, that would normally service the short-term rental market, are being moved onto the long term rental market.''
''This has helped to boost supply and ensure consistent income for property owners that previously relied on the tourist market.''
But Airbnb's country manager for New Zealand and Australia Susan Wheeldon said to date, it had not seen a material drop in the overall number of listings on its platform.
"While the Covid-19 crisis has significantly disrupted the tourism industry and wider economy, we know that travel is resilient in the long-term and will ultimately recover.
"Like many others, Covid-19 has caused significant hardship for the everyday people who rely on sharing their home for extra income and understandably in the circumstances, some have to make really difficult choices based on their personal circumstances.''
To help ease that hardship, Airbnb recently announced a US$250 million fund to help accommodation hosts impacted by Covid-19-related cancellations, as well as a US$17m Superhost Relief Fund that's been largely personally funded by our founders, she said.
