First National says Labour tenant pledges will hurt market and push up rents

First National Real Estate Chief Executive, Bob Brereton, says Labours proposal to change tenants rights will severely, and negatively, impact on a Landlords ability to protect their investment and will result in increased rents for tenants.

Mr Brereton says Labours pledge to outlaw Letting Fees is a good example of a poorly thought out policy with an unintended consequence.

“Letting fees are charged by professional property management companies to cover the costs associated with securing the right tenant. They then act as advocates for both the landlord and tenant to ensure comfort, safety and protection of the investment. If you remove letting fees many Management Companies will be forced to increase management fees to compensate. This will simply force up rents”

He has similar concerns about the proposal to remove the right to end a tenancy, with 90 days notice, without cause.

“This is simply ludicrous. There are many reasons why landlords might want vacant possession of a property and infringing on these is a direct challenge to private property rights”.

Mr Brereton says a similar proposal to increase the provision to end a tenancy after 42 days, in certain circumstances, to 90 days will have a significant impact on property values.

“The 42 day provision is used, particularly, when a Landlord sells a property and the buyer requires vacant possession or where the Landlord needs to move back into it urgently, so this provision could impact on a Landlords ability to sell”.

However, Mr Brereton says one of the biggest challenge of Labours policy is the proposal to regulate market rentals by passing legislation to cap the amount by which rent can be increased. He provides an example to illustrate this point:

• A landlord buys a house, putting up say $200,000 of their own cash or equity, to provide a home for someone without one.

• They borrow $450,000 for the purchase at 5% interest and, paying only interest, it costs them $22,500 in interest, another $2000 for rates and $1500 for insurance ($26,000 pa)

• This means they have to rent the property for $500 per week, just to cover costs.

• Add in a 5% return on their equity and its $692.

• Anything less than that and you are just providing social housing

Mr Brereton says Labours policies come on top of other pressures, already faced by Landlords, and this risks being ‘the straw that breaks the camels back’.

“Landlords are facing negative returns, flat prices and the threat of a Capital gains tax. If interest rates go up, as predicted, it would only take a small move in a flat market to convince many Landlords to get out of the market”.

ENDS

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