Despite winter being traditionally slower for the real estate industry, sales are still declining. Prices continue to slide, while days to sell rise. Looking for alternative ideas however, EVES is suggesting property management could be a viable option.
The past two years saw an unprecedented explosion in house prices. The snowball blindsided all forecasts when Covid-19 struck. As with any cycle however, what goes up inevitably goes down. Counteracting the extraordinary profits many homeowners made, current headlines regularly point out the obvious as monthly figures from the Real Estate Institute support the decline. Not all vendors are meeting the lower expectations, however. In revising their plans, renting the property out is gaining traction.
The nationwide downward shift has been considerable during the first half of 2022. Tauranga has fared better than some. Many properties sit on the market for longer and median days to sell increase significantly, according to EVES General Manager Property Management, Joanna Martinez-Hart.
Recent Bay of Plenty figures show the median days to sell in June 2022 was 55 - an increase of 24 compared with June 2021. While it created a predicament as agents soothed vendors through a process of lowering their expectations, it also opened the door for a new approach. If selling was still the ultimate goal, but now wasn't the right time, why not rent the property out and ride the tide until the pendulum swung?
While banks like Westpac and ASB now predict a 20 percent drop in values over the next year, OneRoof property commentator Ashley Church is more positive. He recently stated that between 1982 and 2011, the average growth rate of houses over any 10-year period was almost exactly 100 percent, when averaged out across the entire 30-year period. While that rate was slower leading up to 2021, it took house prices an average 12 years, rather than 10 to double over that time. Ashley believes long term the general direction is up.
Renting viable in the interim
In Tauranga and Western Bay there are 240 rentals currently on EVES Property Management's books. A dedicated team of property managers are kept busy as they assess market valuations, rental expectations and handle property management on behalf of clients.
They are seeing a noticeable drift as vendors rent their homes in the current market. Reasons vary. Some have gone overseas and chose to retain their property rather than sell in the interim. For various circumstances, some have rented their parents' home, rather than sell immediately. Others have relocated elsewhere, but chose to rent and wait for a better market. Some have selected to rent while still advertising their home for sale; the tenant fully aware of the temporary situation.
EVES rental property manager Katy Laidlaw has noticed a definite mind shift.
"I believe people are looking at other options, rather than selling. The market has slowed and properties are taking longer to sell."
She recently rented a deceased estate that had been on the market since January. Referred to Katy for a potential rental, she advertised the property on August 3rd and the tenant moved in this week. Another rental came Katy's way after the property failed to sell in three months as the owner prepared to move overseas.
"I advertised the last week it was on the market for sale. We had a tenant selected, offered it to them after the last open home and signed an agreement the same day it was withdrawn from the market."
The owner has since left the country, but has the comfort of income and no worry about a property languishing on the market.
Renting while still marketing a property for sale is also being picked up – such is the demand. Katy looks after one, which is tenanted on a reduced rent.
"They moved in while it was advertised for sale. I have recommended to people that if they rent their property, it could be on a periodic tenancy."
Tenants are under no illusion that the house could sell. In the meantime, the vendor gains from income, while their property continues to be marketed.
EVES property manager Max Thomas is also noticing the changed mindset. She recently obtained a new management due to dropping sales prices. With the owners unable to obtain the price they wanted, they opted to rent. It was rented quickly and for a good price.
Depending on the property, rental estimates in this district run from $500-$570 for two bedrooms; $620-$680 for three bedrooms and $720-$760 for four bedrooms. More upmarket properties can achieve higher rents. Location is always key as well.
In an industry driven by results and satisfied customers, this rental solution is gaining popularity as a win-win outcome. And in filling the rental demand, the double win ultimately becomes a trifecta.