Having been in and closely attached to the real estate, housing, construction and property management industries for some 50 plus years, Howard, apm Director, has seen many property cycles. With an election coming up and increased interest rates, property and rentals are hot topics, so what does he make of the current property market?
There has been much written in the media and aired on talk back radio about the sell down of rental accommodation in New Zealand by property investors. This is a very important topic as it runs alongside and impacts one of the other big election issues of the “shortage of affordable housing in New Zealand”.
Having been in and closely attached to the real estate, housing, construction and property management industries for some 50 plus years, I have seen many property cycles. Cycles that have shown too many and then too few commercial, industrial and/or residential properties in the marketplace, and then I have also seen cycles of too few and of too many rental properties.
Historical records show investors, particularly those in the Auckland area, who have purchased and held residential rental properties have done very well. In 2002 the average sale price of a home in Auckland was $263,900.00 whereas in April 2023 it is $995,000.00. Sure, rentals have not kept up with that massive increase in value but it is worth noting that interest rates for a two and/or three year mortgage in the period from 2012 until mid-2022 have been under 6% and even dropped to 2.5% at one point.
New home construction and rental accommodation in Auckland has always been in catch up mode, we never seem to have enough. New dwelling consents are again now in decline by as much as 30% compared with this time last year. How far construction numbers will actually fall is uncertain and difficult to predict but already it is clear that, with a forecast net migration gain for New Zealand at 70,000+ people in 2023 (most of them coming to Auckland), it is not hard to see that our housing shortage in Auckland will continue for some time. Most economists are saying the combined effects of these changes will mean a larger proportion of New Zealand’s population will live in rental accommodation in the years ahead.
Legislation such as the introduction and then the extension of bright line tests and non-deductibility of interest has also had a negative impact on the availability of rental housing. I personally hope to see these regulations revisited and reversed by Central Government in the near future.
On balance and despite the price drop of the last two years, the owning of residential rental real estate in Auckland has been one of the better investment opportunities to choose from. For many decades housing has been an investment that Kiwis know and understand.
We still need more well priced rental houses to meet the Auckland demand. If you know of any family or friends who would like to have their properties professionally managed, please let me know.
What about a real estate investment that is an alternative to residential property?
On the commercial property front, as the city and its suburbs grow, we need more factories/warehouses. These have appeared in the northern, western, and southern suburbs of Auckland. The good news for investors is that most are rented to either start-ups and/or companies that are expanding and need more space. Although there is a need to take a little more time to do due diligence these new or near new commercial properties can provide sound and reliable sources of income over the longer-term.
apm manages several hundred commercial tenancies and we are always looking for more opportunities to grow our commercial property management division. I would welcome the opportunity to tailor a management package to suit your needs.
Feel free to contact our team via the contact form below.