Housing costs and Market rents what is the difference? What divides the nation in renters and homeowners and why are Kiwi bungalows and rental homes below common housing standards in the developed world?
Rental Market New Zealand
Does the Renting Culture make any Difference?
Housing costs and Market rents
People were moaning about the rental housing market and that recent changes have not been pushed far enough. When asking, they did not know what the changes really are, is that common? Well, if you introduce changes with a stick, there will always be winners and losers, right?
What would be the best relief for the rental market, upgrading dated homes (house improvements) or building more new housing? Landlords have limits due to the skyrocketing housing costs as everyone else, but more importantly because investments for home improvements are not rent deductible.
Not always understood is housing costs and market rents are not directly connected. Housing costs are driven by the price index (costs of finance and services, inflation, taxation and levies) while market rents are the reflection of the market sentiment (supply and demand, location, type of rental, etc).
This separation of rebuild value and market value has created a diverse housing culture never seen before when I was looking for a family home. I have seen houses in the original condition as built in the 40s with open fire-place, cold and damp and with no convenience at all, well maintained and upgraded homes, and new-builds with mould and structural moisture damage. Such poor housing standards and dated housing have been the problem for decades. The magnitude and the whole extent have now been addressed by changes to the tenancy law where most complaints come from.
Unfortunately, changes with the stick hurt people most who live within their means and pay increasing rents, but also have to spend as tax-payer for upgrading the social housing stock. That is because the government’s slumlord has the largest number of dated and run down rentals. The question is—what is the sense behind to split the housing standards in rentals and owner-occupied homes? Countries with a balanced housing culture have one standard accessible for everyone?
Renting here or there is not the same. That is something renters have to learn quickly who did not grow up in NZ. The housing market is roughly divided in 65% owner-occupied homes and the rest in rentals which you can split in social housing (State Housing) and rental housing (investment properties owned by private investors or landlord businesses). Apart from purpose built investment properties like apartments or flats in multi-unit blocks the rental homes are mostly originated from private investors. That are people who moved up the property ladder, built or purchased another house and rent out the older one for cumulating wealth or as preparation of their retirement.
That divides the nation in renters and homeowners while renting is regarded as the second option. Lifestyle renters use flexibility to derive higher income from good paid jobs in contrast to homeowners who draw down their retirement savings in their home or property investment. The rental market is regulated by the Residential Tenancy Act (RTA).
The ultimate goal for Kiwis is owning a home and that has split the nation in 35/65. Renting is rather seldom a chosen long-term solution. That explains people’s common ignorance about the housing market, the demand for cheap rentals for less than 12 months and the need of social housing for people who cannot afford to retire in a mortgage-free home.
A well developed subculture makes life for the majority of good tenants complicated and procedures like tenant screening, credit and reference checks are nowadays prerequisites. Also here we try to be transparent as much as we can. Hope such information are helpful for you when following our blog posts.
Why are Kiwi Bungalows so different?
The answer simply is the Kiwi Bungalow is a frozen snapshot of time. As these houses were built in the 40s, 50s, 60s and 70s there was nothing wrong with them. In those days mum and kids were home, kept the fire going and doors and windows ventilated the rooms.
We purchased a house built in the 40s 8 years ago with open fire place, no heat retention, freezing cold and three bedrooms with no heating at all. The upgrade has cost us a fortune, and that is the point. Most families struggle to pay for ongoing housing costs and prefer to sell for capital gain. Similar to market rents in NZ (mentioned above) the market values and CVs (Capital Values for rate assessments) are totally disconnected from rebuild values.
Lifestyles have changed. Nowadays people come late home from work. Houses are freezing cold as nobody is home to keep a fire going. For warming up is often not time enough. And by the way did people in the 40s and 50s shower every day? It is common in these houses that moisture from human habitation causes mould.
In contrast in regions with cold winters like Europe, houses have been built with heating in all rooms, double glazing and good insulation. But most importantly (as I grew up) rental and owner-occupied homes have the same standards in these countries.
For rental properties law changes have been set coming into effect from 1 July 2016 and 1 July 2019 (insulation and smoke alarms) and enforcements of tenancy law (notice of eviction, abandoned tenancies) and for securing long-term tenancies. The Parliament will be working it through by the end of 2015.
If you treat renting as permanent solution the current tenancy law already offers everything you need to secure a long-term rental. Being informed offers the answer to question you might have, or at least an access path where to find needed information.
And finally use the knowledge e.g. about the tenancy application process to your advantage. Be a savvy renter, and stand out from the crowed. Quality rentals and new built housing is available for you if you understand the housing market and how to work together with landlords who are always looking for good tenants. Be one of them. Good luck.
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Klauster Properties Ltd - Renter’s Blog
Rent or Own - Decision at some stage in life?
Renter’s Blog lead to a real person, IT professional, investor, landlord and business owner with interests in sharing experiences. Life is a dream with a deadline, happiness comes from making the right choices and having realistic expectations.
Confession: I have been a happy renter for more than 25 years before buying a family home and later becoming involved in property investments and developments.
I used to live in apartments or rental homes, worked in many different countries and experienced different housing standards and renting cultures. I would love to see a social and legal frame work around housing policies that supports renters and landlords alike.