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The demand for rentals is very high tight across the country and in most places supply is not keeping up with demand, says Trademe’s head of Property in an article by The Landlord.
“From what we’re seeing renters are staying in their rentals longer while they get deposits together and in certain parts of the country home-ownership is moving beyond the means of many Kiwis. Unless the supply of rental properties can be increased, we’re only going to see rent prices climb in the future” Aaron Clancy says.
The nation’s median rent is now $495 per week, up 5.3% on last year.
As long as the government keeps trying to make rental property unattractive to investors, rents will continue to rise. It’s increased rental property supply that’s needed to slow rent rises and the best way to do that is to incentivise property investors to buy new rental property off-the-plans. It’s off-the-plans purchases that allow builders and developers to get the construction funding they need to build more housing.
Private builder’s and developers are the ones who are going to add to housing supply, the government has shown beyond a doubt with the failure of Kiwibuild that they haven’t a clue to how develop new housing.
It’s time the government stopped punishing property investors and instead welcomed their investment and their desire to buy and rent out new homes. Property investors provide an extremely value service, stop being jealous of the fact that they make a profit from renting out their houses and appreciate the service they provide.
Rental inflation over the past few years has been largely a supply and demand story based on high immigration. National average rent rises peaked in 2016 at 9%.
What’s pushing rents up now is more due to government policy changes and the need for landlords to raise rents to remain profitable.
Despite what our naive prime minister might think, most property investors own one or two properties and hold long term, rental income is a core reason for them holding property. They will continue to raise rents as long as they need to.
Expect rents to keep rising strongly over the next few years while the new policies settle in.
None of the factors listed below affecting the Australian market apply to NZ and despite the fact that the NZ government has introduced uncertainty into the property market with their deluge of ‘possible’ changes to regulations, listings are low and sales in relative terms are strong.
Australia is suffering a credit crunch. That is not happening here in NZ.
There is an over-supply of property in Australia. We have an under-supply.
50% of recent consents issued in Australia have been for apartments. In NZ the proportion is about 11%. Apartment markets are far more volatile than standalone dwelling markets.
States in Australia have levied punitive stamp duties and annual land taxes for non-residents.
At the peak, 45% of home lending in Australia was to investors. Our peak was 35%. In Australia recently 31% of lending was still for investment. We are at 18%.
The household debt to income ratio is higher in Australia than NZ at 190% versus our 164%. Their debt servicing ratio (interest payments vs. income) is 9.1% vs. our 7.8%.
Chinese buyers appear to have been far more present in Australia than here and their withdrawal has been felt more there than here.
It’s still a good time to purchase a rental property in NZ.
We doubt that a capital gains tax will be introduced as most NZers don’t want one. If anything, I think the brightline test will be extended from 5 to 10 years. This is already a form of capital gains tax and easy to administer.
Rental property is in short supply, rents are rising quickly and property investment is still a proven method of creating wealth and inflation protected cash flow. The sooner you start, the better.
CEO Assured Property Investments
Credits: Differences between NZ vs Australian market research courtesy of Tony Alexander, BNZ.
Rents rose 7% in Hamilton last year and we’ll likely see the same again in 2019.
Now that Kiwibuild is a confirmed failure, Twyford is trying something new. The government’s solution to nightmare council processes is to introduce more State Control via a new mega-bureaucracy called the Housing and Urban Development Authority (UDA], which will have the power to cut through red tape. But wait, not for all builders and developers, only for themselves, the UDA.
Instead of fixing the problem all builders and developers face, of long and expensive consenting processes, exorbitant development contributions ($99,000 per section in some parts of Hamilton) and lack of council infrastructure to name a few of things slowing down development and driving up cost. Phil will have the power to build whatever he wants, wherever he wants.
Lookout for hideous socialist housing estates in your town soon as Kiwibuild is pushed aside and Taxcinda starts her state housing building program…
The upside for existing rental property owners is that many builders will be drawn to the seemingly lucrative government building contracts, meaning less (desirable) rental property will be built. Demand will strengthen and Rents for good quality rental property will continue to rise.
You can’t fix the housing shortage by making bigger bureaucracies, it’s only possible through more supply, and that won’t happen anytime soon.
Government policy will extend the housing shortage and drive up rents.
Yes, you heard me. If you invest in residential property, you are awesome!
Don’t believe the trite remarks that the government is rolling out. Don’t listen to the complaining and moaning from those sitting around with their hands out, waiting to be given something for nothing.
You are a responsible Kiwi who has worked hard, saved money and invested in a home that you are kind enough to allow other people to live in. That’s right, you are providing others with housing, a place to live, a home. You are delivering a very important community service.
You are risking your savings to provide a home for others. Obviously, you need to get paid for that. You have mortgage interest to pay, insurance, rates, maintenance and of course you need a return on your investment, a profit.
Well done! Good on you for investing in residential property, for giving people a place to live and for doing something about improving your financial wellbeing in the process. Regardless of what the current government do to try and punish property investors, you will win long term. Property will grow in value, rents will rise. You will profit from property, you might just need to hold a little longer then before. All the new rules and costs do is extend the time you might need to hold property before receiving the same gain.
Stay the course. Feel good about yourself. Ignore the negativity. You are a property investor and landlord offering a valuable service, you will reap the rewards.
I hope that Jacinda and her team are starting to feel guilty for what they are doing to tenants. The situation is ’terrible’ now but only going to get worse as landlords sell older property and many would-be landlords are afraid to buy a rental property.
If you heap extra costs and headaches onto landlords there will be less rental stock and so less rentals, this means higher rents. You don’t need 100 select committees to work out the basics of supply and demand.
We are building as many affordable rental properties as we can, but we could build more if the Government wasn’t hell-bent on landlord bashing.
They should be ashamed of themselves. It’s the people at the bottom, the tenants, who Jacinda and her team are supposed to protecting that they are hurting most.