Garden City gears up

Monday 4 March 2019

A plateau in values and rents has been a feature of the southwest Christchurch market for some time, but this year the market looks on the up, writes Joanna Jefferies.

Due to the earthquakes Christchurch isn’t operating on the same property cycle as the rest of the country, so while many markets have hit their peak, the Christchurch market is on a unique trajectory.

It’s an important distinction to make, says Braziers Property Management’s Tony Brazier, because if investors are investing cyclically, they need to know where Christchurch sits in that cycle.

“We are probably four and a half years into a five-year slowdown period. So we’re looking at the early signs of kicking away again, it might be the middle to the end of 2019.”

Brazier says an upturn will be due to the loosening of bank loan-to-value ratios, low interest rates and more significantly the catch up between supply and demand, after the oversupply issues caused by overbuilding after the earthquakes.

The oversupply problem meant that at one stage, there were over 2,000 available rental listings across Christchurch.

“To put it into perspective, we can only increase rents when they get down to 800 available on Trade Me. We are now down to about 1,200,” says Brazier.

In southwest Christchurch, the supply and demand equation is certainly beginning to balance and this means the rent prices that fluctuated post-earthquake and experienced a severe correction over the past few years, are now holding firm at a higher average weekly rental than before the earthquakes.

Meteoric growth in Rolleston

In the southwest of Christchurch, the southern motorway, which previously stopped at Hornby now extends past Rolleston, allowing easy access right to Lyttleton, and a quick commute time into the city centre.

But before the earthquakes, Rolleston was “dying” says Brazier.

“There were 27 houses for sale in one street just before the earthquakes and it wasn’t going anywhere very fast.” But after the earthquakes “the whole city sort of flopped over to that southwest side.”.

This has meant meteoric population growth in and around the surrounding areas of Rolleston, and what was once considered a satellite town is now considered an outer suburb of Christchurch.

Because of this Rolleston and nearby Wigram feature predominantly modern standalone houses, typically with four bedrooms and two bathrooms. The suburbs are popular with families and blue collar workers who work at the Izone inland port in Rolleston, or the nearby Waterloo Park industrial zone.

Hot in Hornby

While Lincoln University is only down the road, Brazier says students prefer to live in the inner city, or in nearby Hornby or Halswell closer to the action, rather than flatting in Lincoln itself.

In Hornby, this means a fairly tight rental market, due to the high number of blue collar workers who live there and work in the surrounding industrial areas.

A1 Property Managers’ Hamish Wilson says as an investor himself, Hornby has always been a favourite area.

“The housing stock is very affordable, it’s good quality and there’s a very stable workforce. There’s a raft of industry in Hornby ranging from industrial through to retail. That provides quite a stable rental market.”

While there are some new housing developments in the area, the housing stock is predominantly older, with three and four -bedroom homes available at accessible price points under $400,000.

“To give you an example, just the run-of-the-mill three-beddy is rented for $455.”

Wilson says there’s still a healthy supply of rentals in the southwest for the next 12-–18 months, but that demand will increase once some of Christchurch’s core projects, such as the convention centre and stadium, come to fruition.

“Once those projects are realised that will drive more productivity in the city, which will drive visitor nights, restaurant nights and put pressure on employment,” he says.

Riccarton rent by room

Riccarton is Christchurch’s most densely populated suburb and as such is always popular, with one of the main employers being Westfield Mall. It’s also close to Canterbury University, the Airport, the central city and has excellent parks and shops.

This means there’s a huge spectrum of people renting there and correspondingly a huge range of dwelling types.

“Two-bedroom units seem to be the most popular in Riccarton, for working professionals, in saying that they are reasonably expensive compared to two-bedroom units in the rest of Christchurch,” says Wilson and therefore aren’t as popular with investors, as compared to more accessible locations, such as Hornby.

Quinovic Property Management principal Tessa Keeling says large older houses or custom-built accommodation containing studios with a bathroom off each room are a popular dwelling type for investors in the area.

“Those ones either get rented out on a room-by-room basis or to a group as a whole house. Rents are worked out on a room rate. They might fall between $140 andto $180 per room.”

Keeling says it’s a good opportunity for investors but the entry point may be high for some. “The return is good but they do tend to get a bit of a hard life.” “

Halswell and Wigram in high demand

Established investor Liz Harris owns the Wigram Lodge boarding house in Wigram, which has a capacity of 200 rooms. She says the rooms rent for $180 to $240 per room and the tenancy rate is reasonable, though she’d like it slightly higher – “We’re running at about 95% [tenanted].”

In both Halwsell and Wigram there’s a mix of decent quality older housing and new developments, says Keeling. “We always get good quality demand and high quality tenants and higher than average rents in that area.”

Wigram tends to be a slightly larger house at a higher price point, but Keeling says she would recommend investing in these areas because of the high quality tenant.

“If I was advising someone to buy a rental property, I would recommend any of those suburbs to buy in as opposed to the eastern side of the city. I think you get a better quality of tenant and you’ve got better school zones and my presumption would be that you could get better capital gains as well.”

Getting the right tenant for a property is key, says Keeling, and Halswell gets good quality demand and higher than average rents.

“Wigram is similar. There’s good demand, probably more expensive houses, they tend to be four bedroom, two bathroom houses. It’s sought after and will probably only be getting better with more facilities and infrastructure.”

Year ahead

Keeling says the rental supply and demand equation has settled since its correction following the oversupply post-quake.

Before Christmas, she says she only had five or six properties available for rent “which is a pretty low number for us to have in terms of available properties, so that’s a good sign that demand is meeting the supply”.

In the year ahead, she expects the increased costs of compliance and regulatory changes, such as the removal of letting fees will be passed on to tenants through marginally increased rents.

Wilson agrees demand is increasing slowly and that there won’t be any huge surprises in 2019.

“I don’t think it’s going to be a rockstar rental market in 2019 but it will just progressively carry on in the current trend which is a 5% uplift for the year.

"That [rental] supply that’s currently there – I’ll expect that to be absorbed and when that gets taken up we’ll see some further pressure on rents.”

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