Property expert: 'Rocks in your head' if you think rents in Bay of Plenty will drop

Rotorua is likely to hold its own in the rental market, property experts say. Photo / File

Rotorua tenants 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 will dictate the market regardless of the impacts created by Covid-19 - but one agency expects it could flip as more holiday homes are rented out.

Professionals McDowell Real Estate Rotorua general manager of property management Callum Razak said the firm had already listed some holiday homes and he predicted in the future there could be an oversupply of housing.

''We have a small portfolio of holiday homes but in less than a week 90 per cent of those converted over to rentals.''

But one of the biggest challenges was also finding suitable tenants, he said.

''There are not enough good quality tenants in the marketplace looking to pay reasonable rent. So naturally that can cause an oversupply of properties and this is when the rental prices will level.''

But Tremains Northern Group chief executive Hayden Duncan said any agent or property manager who thought there would be any downward pricing on rental accommodation in the Bay of Plenty has "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 home ownership.''

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 home owners 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.

Rotorua Property Investors Association president Debbie Van Den Broek. Photo / File

Rotorua Property Investors Association president Debbie Van Den Broek said by her estimation a $400,000 property in Western Heights on an interest-only loan would cost $384 a week which included rates, insurance, government compliances and maintenance - but did not include paying back any of the principal.

In her view some rents had been unusually high in places like Western Heights compared with most preferable suburbs (like Springfield).

''If the landlord purchased on these inflated rent assessments then they may need to review their decision to continue to own the property or accept more challenging tenants''.

Landlords who had lost their job and could no longer afford to subsidise the rent ''will need to sell up''.

She said paying for all the new items required under the Healthy Homes legislation was also impossible.

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 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 5 per cent of their tenancies and deferred rental payments for a further 1.5 per cent.

For landlords who lowered the rent, the average reduction was 43 per cent or $210 per week.

''Expenses, such as rates, insurance, repairs etc 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 Trade Me Property spokesman Aaron Clancy said the average weekly median rent in Rotorua in March had jumped to $450 compared with $395 the same time last year.

It was too early to understand the full extent of how Covid-19 would affect the Bay of Plenty rental market but trends had started to emerge.

''In tourist centres - including Rotorua - we have seen an increase in the number of fully furnished rental properties coming on to the market. This is because more investment properties, that would normally service the short-term rental market, are being moved on to 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, the platform had not seen a material drop in the overall number of listings.

"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 its founders, she said.