Market predictions 2013 – Is this the year to buy?

2013 looks to be an interesting year for property investors.  There will be opportunities for those looking to increase their portfolios.  There will be changes to Government regulations as all political parties have housing as a main issue in their policies.  Also with a new minister of housing we would expect to hear some new housing policies announced this year.

Are rents still on the increase?
Rental increases are only caused by upwards pressure, if there is a shortage rents will increase.  Furnished properties increase average rents and as more are required this will further drive average rents up.  The median rent is often a better indicator.  As fixed term tenancies come up for renewal, generally owners will increase rents to the new current market rent and statistically this is seen as an overall rental increase.

How long is it taking to rent properties?
Each property is different, currently there is a high demand for modern well maintained properties which rent very quickly.  The traditional rental property with the typical beige paint, landlord carpet, original kitchen and bathroom still takes around two to three weeks to rent.

What sort of properties are in demand?
Currently family homes that are clean and tidy with a modern/renovated kitchen and bathroom, ensuite, double garage, good heating, three bedrooms plus and within the $500 – 600 per week rental range.

Are people looking for Furnished? Short term? Long term?
Mainly short term while EQC work is being completed however this is difficult for Landlords as it is hard to determine a tenancy end date as EQC are not reliable on completion dates.  Six to eight weeks can turn into 10 to 12 weeks so the property cannot effectively be advertised until the tenants have vacated.  High rents are being achieved but there is a lot of downtime.

Are there many workers looking to rent?
Rebuild workers don’t stand out as many families are moving here for various occupations.  Most want to rent initially and get to know the city.  Some companies are renting properties for their workers and we expect demand likely to increase in this area for the foreseeable future.

Is there a housing shortage in Christchurch?
Supply of new houses is unlikely to keep up with demand for rentals, this will put more pressure on the rental market causing rents to increase.  Yes there is a housing shortage in Christchurch and it is likely to remain in the foreseeable future.  Longterm, unfurnished properties still remain popular.  All current factors shaping the market are susceptible to change this year.

How does the standard of housing in Christchurch compare to other NZ cities?
A lot of people took up the Government insulation scheme.  They installed heatpumps in place of open fires or out dated log burners plus insulated homes with poor or no insulation.  EQC have also redecorated houses over Christchurch after the Earthquakes.  Overall this has resulted in Christchurch’s housing quality to be of a very good standard.

Is there demand for red zoned houses?
We are seeing a lot of investors buying them.  Investors are carrying out the repair and putting them up for rent.  There is a demand for these types of properties from a tenant’s perspective as long as they are safe.  Usually investors are paying section price so the house is a bonus, there is no insurance so no finance, so a cash sale is the way to go.  Investors are seeing high yields and good cash flow but they also need to consider the future plans for the section and what the likelihood is of those plans/options changing.

What will the options be for investors in the inner city?
Most buildings will be owned by investors – commercial and residential.  There will be opportunities to buy privately or in syndicates.  Be careful buying too early as there will be a lot of construction noises in the city for the next 10 years or so.

What is the demand like for rentals in outer Christchurch towns – Rolleston, Kaiapoi, Rangiora?
Demand is strong for rentals in these towns and the development of these towns is going ahead greater than the initial visions/concept plans.  Investors are buying “Turn Key” packages through building companies and achieving good rents.

Is it a good time to buy?
Yes but it is important not too overcommit financially because factors can change rapidly.  Before buying work out your timelines and requirements for the prospective property – is it a short term investment, long term investment or retirement income?  Keep in mind we are in a unique environment but there are still dangers out there.  These could be the University moving into the city, a large building company constructing a new satellite city, the introduction of a capital gains tax, the Euro crashing or interest rates rising to name a few.

Work with professionals who are property investors and most important use the opportunities offered by being a member of your local Property Investors Association.  We are only too happy to talk over the viability of a prospective or current property being a good investment – contact Claire Wilson or Martin Evans (03) 351 7643.

Written by Martin Evans & Claire Wilson, Edited by CPIA Magazine March 2013

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