The COVID-19 emergency has transformed many industries and sectors. The property and private rental market were not immune to these transformations.
There are some realities that haven’t changed, not least that people will always need somewhere to live. This gives our industry as a whole a high level of resilience, resilience that other sectors and industries don’t have.
That said, individual landlords can still be impacted by the transformation that is taking place.
The Short-Term Rental Example
Just look at what is happening with the short-term rental market as an example. With tourism closed down, many property owners who adopted the Airbnb business model had no choice but to change direction.
This has flooded the rental market with excess properties, both apartments and houses. As a result, tenants now have more options, which could put downward pressures on rents.
This is not helped by the wider economic situation where people have lost income and jobs.
Plus, the impact of the above scenario will spread beyond short-term rentals into the market more widely.
What You Should Do to Protect Your Investments and Income
A lot of the advice and guidance for landlords up until this point of the COVID-19 emergency was about getting through the lockdown situation, following the law, and working together with tenants.
We now need to look to the future. What will your portfolio look like in 12- or 24-months’ time? What about your rental income? What about profitability?
To protect all three – portfolio, income, and profitability – all landlords in New Zealand must adapt to new strategies. Here are some of the things you should consider in post-COVID-19 New Zealand.
Focusing on the Long-Term
Low-risk investors who focus on the long-term and who have strong balance sheets will have opportunities over the coming months. Predictions are that house prices will fall. Combine this with low-interest rates, and there could be the option for some investors to expand their portfolio.
Property managers, landlords, insurance companies, and others involved in the private rental sector will need to consider a change of mindset. This includes moving from an adversarial approach with tenants to one built more on relationships and trust-building.
The most successful property managers are also likely to evolve more into an asset management role. So, instead of the endless rotation of inspections and new tenancy agreements, the service will become more about helping landlords maximise the overall profitability of their portfolios.
After all, net rental income is only one part of a property portfolio’s profitability calculation.
Changing the Approach to Inspections
Following on from the above point, our industry needs to use the changed mindset to take a new and modern approach to inspections.
The existing system may have suited a previous era, but it is not fit for purpose in the post-COVID-19 era.
Some ideas on this topic have already been floated by others in the industry. They warrant much wider consideration. This includes:
- Remote inspections replacing in-person inspections
- Less frequent inspections
- More flexible approach to inspections where the frequency is based on a risk assessment, i.e. the riskier the tenant, the more frequently inspections take place
Utilising Smart Home Technologies
Even before COVID-19, other industries were going through change driven by customer demand and the availability of new technologies. These changes are known by various terms including the Internet of Things, Industry 4.0, and digital transformation.
The private rental sector has some catching up to do, and this is the ideal time to do so. By embracing smart home technologies, you can improve the service you offer as a landlord to tenants while also protecting and enhancing your investment.
There are challenges, most notably privacy, but it is an area worth exploring further, given the potential benefits.
Adapting to Change
The central theme of the above is that things are not going to be the same in the months and possibly years ahead. In fact, the sector might never go back to the way it was before COVID-19. We need to adapt to these changes with minimal delay.
Please don’t hesitate to contact us on 022 010 7099 for further information on this.