Property owners who were relying on tourists to pay off mortgages on holiday homes are under increasing pressure to adapt as Covid-19 restrictions cut off their source of income.
While owners of Airbnb rentals in major cities and towns will have relatively few problems turning their properties into long-term rentals, especially in Level-3, those with baches in tourist locations may find the switch challenging.
OneRoof talked to experts in property management and property investment to find out what options Kiwis with second homes have available to them and who will be facing the biggest pressure to sell.
Queenstown Harcourts property agent Kirsty Sinclair says the tourist spot is going through a rough patch, with the majority of property owners seeking to their holiday homes into long-term rentals.
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“A client of mine has an Airbnb booking for tourists who are here for the lockdown but 99 per cent of that market is non-existent right now,” she says.
Owners who have little debt to their name will be sitting tight for the next six months, she says. “They'll be happy to wait for a revival in the domestic tourism sector.”
But she says those who are thinking of selling won’t do so right away either as they will need to evaluate all their options. It all depends on the type of Airbnb property they own.
Luxury homes with views of Lake Wakatipu may still be viable short-term rentals if the tourism industry picks up again, while new-builds in high-density suburban areas such as Lake Hayes Estate or Shotover Country are more likely to be turned into long-term rentals.
“It makes a lot of sense for owners of suburban properties without lake views to put it into the rental pool and re-evaluate their situation in 12 months. They might be happy to keep it as a residential rental going forward,” she says.
On a flip side, renters in Queenstown will have more options and less competition, putting downward pressure on rental prices.
“Rents have adjusted already, and tenants will have a good selection of properties to choose from,” Sinclair says.
Older propertied will be harder to turn into long-term rentals as they might need to be upgraded to meet new legal requirements. “For modern properties, it’ll be an easy transition,” she says.
Sharon Cullwick, executive officer of New Zealand’s Property Investors Federation, says owners whose homes don’t comply with Residential Tenancy Act and Healthy Homes standard will spend around $2500 on insulation alone.
“Some of those properties don’t have heating in the living room to get up to 18C and extracting fans in the kitchen and a bathroom.”
Waikato Real Estate property managers Michelle and Oliver Pearson say it’s inevitable that demand for short-term rentals will drop.
“It is quite likely that some of the holiday homes around New Zealand will not see any bookings until Christmas. That is a long time for property owners to hang around and wait for some income to come in,” Michelle says.
Oliver advises those considering turning holiday homes into long-term rentals to do their research on rental levels.
“Too expensive and your property will lie vacant and your income will be zero. Pitch it too cheap and you’ll leave money on the table,” he says.
Insurance should be a factor in owner thinking.
“Landlords need to have a certificate of insurance on hand in case the tenant asks to see it, and the landlord insurance excess now needs to be included in any new tenancy agreement,” Oliver says.
Another consideration is clearing out the appliances and furniture that are necessities for short-term rentals but not for long-term rentals. Books, magazines, board games, kayaks, beach towels, beanbags and other items will need to be stored elsewhere or sold.
