Predictions for the property market

I have been asked to guest write an Auckland rental property market update this month. In taking on this opportunity, I decided to take a slightly different approach.

Like me, at this festive time of year, you are most likely sitting back, enjoying some holiday cheer and thinking about next year.

Therefore I hope you find this “one man’s opinion” based on my discussions with other property managers and investors, useful. So rather than isolate the “movers and shaker” suburbs in the Auckland rent market, I thought it might be more valuable to give my predictions on the rental market over the coming medium term.

As usual, you can view the individual suburb results of the latest Auckland Market Rent Statistics on the Allen Realty Ltd website, and we are always happy to hear from you if you have specific questions.

It seems to me, based on observation of customer activity, that serious investors are busy buying additional rental properties.

That signifies to me that investors who purchase rental properties for either income, capital gain, or a combination of both, see that the prevailing market conditions, moving forward, will be favourable for the investor in the medium term.

The general factors that are most mentioned by investors I talk to include but are not limited to:

1. The medium-term interest rate projection seems to be attractive to investors.

2. Government policy seems to indicate a greater reliance on the private sector for the provision of rental accommodation rather than the State.

3. The Auckland Council policy of restricting land supply restricts the growth in supply of new rental stock.

4. Providing new stock is a long term project.

5. Both major parties seem to now be in agreement in regard to a capital gains tax.

6. The baby-boomer generation are looking to secure their retirement with land and building investments.

7. The population is predicted to continue to grow in Auckland with a doubling of the population in the greater Auckland area in the foreseeable future.

8. The LVR restrictions have actually provided an easier playing field for investors as first home buyers are shut out.

9. The major banks are competing for clients and seasoned investors are a good bet.

10. The home ownership rate continues to decline, which increases the demand for rental stock.

11. Returning New Zealanders, buying property from the rental market, decreases the supply of rental stock.

12. Migration is a factor in reducing the amount of rental stock available, and increasing the demand for rental stock.

13. Investors I talk to predict the capital growth in percentage terms, in outlying suburbs, to be upwards of 20% as general housing stock requirements are squeezed further, and rental demand is high.

14. Investors I talk to predict rent increases over the next year or two to be on average, 10% to 15%.

15. Confidence in the general economic outlook for New Zealand.

It seems to me that the collective intelligence of seasoned investors, based on these general market conditions as noted above, seem to signal that it’s a good time to be a prudent, but active investor, or at least keep hold of what you have.

Day-to-day issues still apply to serious investors, and they include:

- Prudent purchase, including professional analysis and advice during the purchase process.
- Serious monitoring and professional management, of your property assets.