Tenancy law overhaul won't significantly impact investor appetite

by Ksenia Stepanova29 Aug 2018

The government’s overhaul of ‘antiquated’ tenancy laws is unlikely to have a major long-term effect on investor appetite for rental properties, according to Loan Market mortgage broker Nick Kotze.

The review of the Residential Tenancies Act was announced this week, with the government focusing on tenant security and stability, improving quality standards and modernising the law so that it can respond to current market trends. It is also looking to better balance the rights of tenants and landlords, to promote good-faith tenancy relationships.

With homeownership at a 60-year low, the government is underlining the importance of strong tenant protections while it works to ‘restore the dream of homeownership for New Zealanders.’

REINZ has since welcomed the announcement, with chief executive Bindi Norwell saying the overhaul will be an important step towards giving renters the protections they rightly deserve – however, she emphasised that the balance of rights must be managed carefully to avoid scaring off potential investors.

“It’s important that we get the balance right between protecting renters and protecting landlords to ensure that we maintain a healthy stock of rental properties for tenants to choose from around the country,” said Norwell.

“We are concerned that extending the notice period a landlord must give from 42 days to 90 days may simply make it less attractive for investors to purchase rental property – especially if they are selling the property.”

Norwell says if there is an end to cancellation of tenancies without cause, the legislation must ensure that landlords can still evict rogue tenants if necessary. If landlords feel the changes disincentivise them too much, it could cause a reduction in rental property stock and a cooling of investor interest.

According to Nick Kotze, there is now going to be a wait-and-see period while investors assess the market and offer their feedback, but the changes are not likely to have a large detrimental impact in the long term.

“It’s very common at this stage to feel a slight slowdown, but ultimately, people will continue on with their business,” he stated. “The parameters of what is being introduced are quite similar to what has previously been implemented in the UK, and that hasn’t stopped investors from investing in the market there.

“My expectation is that 24 months from now, we won’t have seen a massive negative impact from these measures.”

 

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