By Greg Ninness
Residential rents and lower quartile selling prices for three bedroom houses both moved higher in the six months to the end of September, but investors' returns remained about the same overall, according to interest.co.nz's Rental Yield Indicator.
The indicator tracks the REINZ's lower quartile selling price for three bedroom houses in 56 locations around the country where there is a high level of rental activity and compares that with the median weekly rent for three bedroom houses in the same locations, derived from bond data collected by Tenancy Services.
Those figures are then used to provide an indicative rental yield figure for three bedroom houses in each location, which can be tracked over time.
The price trend was generally up, with the REINZ lower quartile price moving higher in the six months to September compared to the six months to June in 41 locations, while it declined in 14 and stayed the same in one.
Rents were also mostly up, with rises in 36 locations, declines in eight, with 12 locations where rents stayed the same.
Those combinations produced 20 locations where the rental yields increased, 23 where they declined and 13 where they stayed the same.
Overall, the figures suggest the returns investors could expect to achieve probably haven't changed much in the last three months, with movement in prices mostly being matched by movements in rents, keeping yields around the same.
Yields remain at very low levels in Auckland
In Auckland, the country's largest rental property market by far, the REINZ's lower quartile prices rose in eight of the 10 locations monitored, declined in two (Avondale and Papakura/Drury), while rents rose in four locations and declined in one ((Highland Park).
That saw rental yields rise in Torbay, Glen Eden, Avondale, and Papakura Drury, decline in Orewa/Whangaparaoa, Massey/Royal Heights, Highland Park and Pukekohe/Tuakau, and remain unchanged in Beachhaven/Birkdale and Henderson.
But yields remain at very low levels in Auckland, ranging from 3.3% in Highland Park to 4.5% in Pukekohe/Tuakau.
That suggests investors could still struggle to find family-sized rental properties in Auckland that would provide adequate returns at current prices and rents.
Other areas with particularly low yields were Tasman, Vogeltown/Berhampore/Newtown in Wellington and Queenstown/Frankton, which all had gross indicative yields of 4.3%.
In other popular rental locations the indicative yields were mostly unchanged in the 4.7% to 5.1% range in Hamilton, were unchanged in Upper Hutt, but down in Lower Hutt, and unchanged in Wellington City. They were a mixed bag in Christchurch.
In Dunedin there was an interesting trend with prices up in all three of the suburbs monitored, while rents were up in one but down in two.
That saw the yields decline in all three suburbs.
That may be a sign that the increased investor activity that's occurred in Dunedin over the last few years could be causing an easing in rents.
Although Dunedin's indicative yields are still in the 5.5% to 6.8% range they are falling, and investors will need to keep an eye on vacancy rates to ensure the influx of investors into the city is not creating an oversupply of rental stock.
The chart below tracks the Indicative Yields in all 56 locations monitored, from September 2014 to September 2018.
Indicative gross rental yields for three bedroom houses in 56 selected areas with high rental activity during the previous six months. Based on REINZ lower quartile selling prices and median rents recorded by Tenancy Services' Bonds Centre in each area over the previous six months.| Indicative gross rental yields for the six months ending: | |||||||||||||||||
| Town/region | Yield % Sept 2018 | Yield % June 2018 |
Yield % March 2018 |
Yield % Dec 2017 | Yield % Sept 2017 | Yield % June 2017 |
Yield % March 2017 | Yield % Dec 2016 | Yield % Sept 2016 | Yield % June 2016 | Yield % March 2016 | Yield % Dec 2015 |
Yield %
Sept 2015
|
Yield %
June 2015 |
Yield %
March 2015
|
Yield %
Dec 2014
|
Sept 2014
|
| Whangarei: | |||||||||||||||||
| Kamo/Tikipunga/Kensington | 5.5 | 5.5 | 5.4 | 5.5 | 5.3 | 5.5 | 5.4 | 5.4 | 5.9 | 6.1 | 6.0 | 5.6 | 7.1 | 6.5 | 6.9 | 7.6 |
6.4
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| Rodney - Orewa/Whangaparaoa | 3.9 | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | 3.8 | 3.9 | 4.1 | 4.1 | 4.1 | 4.3 | 4.5 | 4.5 | 4.6 |
4.8
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| North Shore: |
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| Beach Haven/Birkdale | 3.9 | 3.9 | 3.8 | 3.8 | 4.0 | 3.8 | 3.7 | 3.7 | 3.7 | 3.7 | 3.9 | 3.8 | 3.9 | 4.0 | 4.3 | 4.3 |
4.6
|
| Torbay | 3.9 | 3.7 | 3.7 | 3.6 | 3.6 | 3.6 | 3.7 | 3.6 | 3.4 | 3.6 | 3.8 | 3.6 | 3.8 | 4.0 | 4.5 | 4.6 |
4.5
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| Waitakere: |
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| Glen Eden | 4.1 | 3.9 | 3.8 | 3.9 | 3.9 | 3.9 | 4.0 | 3.8 | 3.7 | 3.9 | 4.0 | 4.0 | 4.1 | 4.3 | 4.6 | 4.9 |
5.1
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| Massey/Royal Heights | 4.0 | 4.2 | 4.2 | 3.9 | 3.9 | 3.8 | 4.0 | 3.9 | 3.8 | 4.1 | 4.1 | 4.0 | 4.1 | 4.4 | 4.6 | 4.9 |
5.1
|
| Henderson | 4.1 | 4.1 | 4.2 | 4.1 | 4.1 | 4.0 | 3.9 | 3.8 | 3.8 | 3.8 | 4.1 | 4.1 | 4.1 | 4.4 | 4.7 | 4.9 |
5.0
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| Central Auckland: |
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| Avondale | 4.1 | 4.0 | 3.7 | 3.6 | 3.6 | 3.5 | 3.6 | 3.6 | 3.7 | 3.6 | 3.7 | 3.7 | 3.9 | 4.1 | 4.2 | 4.4 |
4.5
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| Manukau: |
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| Highland Park | 3.3 | 3.6 | 3.7 | 3.6 | 3.8 | 3.6 | 3.5 | 3.5 | 3.4 | 3.3 | 3.3 | 3.6 | 3.6 | 3.8 | 3.8 | 4.1 |
4.3
|
| Papakura/Drury/Karaka | 4.9 | 4.7 | 4.6 | 4.7 | 4.7 | 4.3 | 4.3 | 4.4 | 4.4 | 4.7 | 4.8 | 4.8 | 4.9 | 5.5 | 5.6 | 5.9 |
6.0
|
| Franklin - Pukekohe/Tuakau | 4.5 | 4.6 | 4.7 | 4.7 | 4.8 | 4.8 | 4.6 | 4.4 | 4.3 | 4.5 | 4.9 | 5.0 | 5.0 | 5.3 | 5.5 | 5.6 |
5.6
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| Hamilton: |
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| Deanwell/Melville/Fitzroy | 5.1 | 5.1 | 5.1 | 4.9 | 4.8 | 4.8 | 4.8 | 5.0 | 5.1 | 5.4 | 5.3 | 5.5 | 6.2 | 6.8 | 6.9 | 6.9 |
6.9
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| Fairfield/Fairview Downs | 4.8 | 4.7 | 4.6 | 4.6 | 4.5 | 4.5 | 4.9 | 4.8 | 4.8 | 5.1 | 5.4 | 5.7 | 6.0 | 6.8 | 6.7 | 6.2 |
7.0
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| Te Kowhai/St Andrews/Queenswood | 4.7 | 4.7 | 4.7 | 4.6 | 4.6 | 4.5 | 4.4 | 4.3 | 4.6 | 4.7 | 4.7 | 4.9 | 5.3 | 5.4 | 5.4 | 5.6 |
5.8
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| Cambridge/Leamington | 4.6 | 4.6 | 4.3 | 4.2 | 4.4 | 4.4 | 4.6 | 4.6 | 4.7 | 4.8 | 5.2 | 5.3 | 5.2 | 5.5 | 5.5 | 5.6 |
5.9
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| Te Awamutu | 5.1 | 5.0 | 4.9 | 5.1 | 5.0 | 5.1 | 5.0 | 5.1 | 5.2 | 5.2 | 5.7 | 6.2 | 6.3 | 6.5 | 6.2 | 6.3 |
6.4
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| Tauranga: |
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| Tauranga Central/Greerton | 4.9 | 4.8 | 4.7 | 4.8 | 5.1 | 4.7 | 4.6 | 4.4 | 4.3 | 3.7 | 5.2 | 5.2 | 5.6 | 6.0 | 6.1 | 5.9 |
5.9
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| Bethlehem/Otumoetai | 4.2 | 4.2 | 4.3 | 4.3 | 4.1 | 4.0 | 4.1 | 3.7 | 4.2 | 4.2 | 4.6 | 4.8 | 4.8 | 4.5 | 4.8 | 5.3 |
5.4
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| Mt Maunganui | 4.6 | 4.6 | 4.4 | 4.2 | 4.3 | 4.4 | 4.4 | 4.2 | 4.2 | 4.4 | 4.8 | 4.6 | 4.7 | 5.4 | 5.7 | 5.6 |
5.2
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| Pyes Pa/Welcome Bay | 4.5 | 4.6 | 4.4 | 4.6 | 4.7 | 4.3 | 4.8 | 4.8 | 4.9 | 4.8 | 5.4 | 5.5 | 5.3 | 5.9 | 5.7 | 5.7 |
5.8
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| Kaimai/Te Puke | 5.1 | 4.8 | 4.9 | 5.5 | 5.0 | 4.9 | 5.3 | 5.4 | 5.5 | 5.6 | 5.8 | 5.9 | 6.2 | 6.4 | 6.2 | 6.2 |
5.7
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| Whakatane | 5.8 | 6.1 | 6.3 | 6.0 | 6.1 | 6.0 | 6.1 | 5.8 | 6.5 | 6.6 | 6.4 | 7.1 | 7.3 | 6.7 | 6.3 | 6.7 |
6.9
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| Roturua: | |||||||||||||||||
| Holdens Bay/Owhata/Ngapuna | 7.0 | 7.8 | 7.8 | 7.4 | 9.3 | 10.5 | 8.0 | 9.7 | 10.7 | 9.4 | 8.7 | 8.3 | 8.7 | n.a. | n.a. | n.a. | n.a. |
| Kuirau/Hillcrest/Glenholm | 5.5 | 5.4 | 5.8 | 4.9 | 5.6 | 5.5 | 4.9 | 7.3 | 7.5 | 6.4 | 5.9 | 6.3 | 6.6 | n.a. | n.a. | n.a. | n.a. |
| Ngongotaha/Pleasant Heights/Koutu | 6.7 | 6.0 | 6.7 | 7.6 | 8.5 | 6.2 | 8.6 | 8.2 | 7.2 | 7.9 | 7.7 | 8.0 | 8.2 | n.a. | n.a. | n.a. | n.a. |
| Hastings - Flaxmere | 8.4 | 9.2 | 9.6 | 9.8 | 9.9 | 9.3 | 8.9 | 8.6 | 9.4 | 9.3 | 10.9 | 11.5 | 11.0 | 12.1 | 12.2 | 11.7 |
11.8
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| Napier - Taradale | 4.9 | 4.7 | 4.6 | 4.4 | 4.4 | 4.9 | 5.0 | 4.9 | 5.1 | 5.5 | 5.4 | 5.6 | 5.5 | 5.3 | 6.2 | 6.3 |
6.1
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| Taranaki: | |||||||||||||||||
| New Plymouth Central/Moturoa | 4.6 | 4.8 | 4.6 | 4.7 | 5.4 | 4.9 | 4.7 | 5.3 | 5.1 | 5.4 | 5.8 | 5.4 | 5.5 | n.a. | n.a. | n.a. | n.a. |
| Waitara/Inglewood | 6.6 | 6.5 | 6.4 | 6.1 | 6.0 | 7.2 | 8.1 | 7.0 | 7.7 | 7.7 | 8.8 | 8.9 | 8.0 | n.a. | n.a. | n.a. | n.a. |
| Whanganui | 8.5 | 9.0 | 9.0 | 8.9 | 8.7 | 8.6 | 9.1 | 9.7 | 9.7 | 10.3 | 9.6 | 10.0 | 14.9 | n.a. | n.a. | n.a. | n.a. |
| Palmerston North: | |||||||||||||||||
| Kelvin Grove/Roslyn | 5.9 | 6.2 | 6.3 | 6.5 | 6.3 | 6.5 | 6.6 | 6.6 | 7.0 | 7.3 | 7.4 | 7.2 | 7.2 | n.a. | n.a. | n.a. | n.a. |
| Palmerston North Central | 5.1 | 5.1 | 5.0 | 4.9 | 5.5 | 6.0 | 5.9 | 5.6 | 6.5 | 6.3 | 5.6 | 5.5 | 6.2 | n.a. | n.a. | n.a. | n.a. |
| Takaro/Cloverlea/Milson | 5.8 | 6.1 | 6.0 | 5.9 | 6.2 | 6.2 | 6.1 | 6.3 | 6.7 | 6.8 | 7.2 | 7.1 | 7.3 | n.a. | n.a. | n.a. | n.a. |
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| Kapiti Coast: |
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| Paraparaumu/Raumati | 5.2 | 5.0 | 4.9 | 5.0 | 5.0 | 4.9 | 4.8 | 5.3 | 5.6 | 5.7 | 5.9 | 6.0 | 6.1 | 6.2 | 6.1 | 6.1 |
5.9
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| Waikanae/Otaki | 4.5 | 4.5 | 5.4 | 5.2 | 4.7 | 4.7 | 5.2 | 5.5 | 5.8 | 5.8 | 5.9 | 6.5 | 6.8 | 6.6 | 6.7 | 5.5 |
5.4
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| Upper Hutt: | |||||||||||||||||
| Heretaunga/Silverstream | 4.9 | 4.9 | 4.8 | 5.0 | 5.4 | 4.7 | 4.7 | 4.6 | 5.3 | 5.6 | 5.8 | 5.8 | 6.1 | n.a. | n.a. | n.a. | n.a. |
| Totara Park/Maoribank/Te Marua | 5.6 | 5.6 | 5.6 | 5.6 | 5.7 | 5.8 | 5.8 | 5.2 | 5.7 | 6.2 | 6.3 | 6.2 | 6.8 | n.a. | n.a. | n.a. | n.a. |
| Lower Hutt: | |||||||||||||||||
| Epuni/Avalon | 4.5 | 4.7 | 5.0 | 4.5 | 4.8 | 4.9 | 5.1 | 5.6 | 5.1 | 5.5 | 5.8 | 5.2 | 5.1 | n.a. | n.a. | n.a. | n.a. |
| Taita/Naenae | 5.4 | 5.5 | 5.7 | 5.9 | 5.5 | 5.6 | 5.8 | 6.1 | 6.2 | 6.5 | 6.8 | 6.9 | 7.1 | n.a. | n.a. | n.a. | n.a. |
| Wainuiomata | 5.3 | 5.6 | 5.6 | 5.6 | 5.7 | 5.9 | 5.9 | 6.3 | 7.0 | 7.2 | 7.7 | 7.7 | 7.7 | n.a. | n.a. | n.a. | n.a. |
| Wellington: |
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| Johnsonville/Newlands | 5.0 | 4.9 | 4.9 | 4.6 | 5.0 | 5.0 | 4.9 | 4.8 | 4.8 | 5.2 | 5.5 | 5.4 | 5.6 | 5.8 | 5.6 | 5.5 |
6.2
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| Vogeltown/Berhampore/Newtown | 4.3 | 5.0 | 4.9 | 4.3 | 4.5 | 4.5 | 4.2 | 4.1 | 4.6 | 4.9 | 5.4 | 5.2 | 5.5 | 5.1 | 5.5 | 5.2 |
5.6
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| Tasman: |
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| Motueka | 4.3 | 4.2 | 4.2 | 4.5 | 5.0 | 4.4 | 4.0 | 4.0 | 4.7 | 5.3 | 5.2 | 5.4 | 5.3 | 5.3 | 5.5 | 5.6 |
5.5
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| Richmond/Wakefield/Brightwater | 4.3 | 4.5 | 4.5 | 4.6 | 4.8 | 4.6 | 4.7 | 4.6 | 4.8 | 5.3 | 5.3 | 5.3 | 5.5 | 5.6 | 5.6 | 5.8 |
5.9
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| Nelson - Stoke/Nayland/Tahunanui | 4.7 | 4.8 | 4.9 | 4.9 | 4.8 | 5.0 | 5.1 | 5.1 | 5.2 | 5.3 | 5.5 | 5.7 | 5.8 | 5.9 | 5.7 | 5.7 |
6.0
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| Blenheim | 5.4 | 5.7 | 5.6 | 5.5 | 5.7 | 5.6 | 5.8 | 6.3 | 6.5 | 6.5 | 7.0 | 7.0 | 6.4 | 6.5 | 6.5 | 6.6 |
6.5
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| Christchurch: |
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| Hornby/Islington/Hei Hei | 6.0 | 5.9 | 5.7 | 5.8 | 5.6 | 5.6 | 5.6 | 5.7 | 6.1 | 6.1 | 6.0 | 6.0 | 6.2 | 6.2 | 6.3 | 6.5 |
6.3
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| Riccarton | 5.6 | 5.6 | 5.2 | 5.7 | 5.1 | 4.7 | 5.0 | 5.2 | 5.5 | 5.0 | 5.7 | 5.0 | 4.9 | 5.9 | 5.2 | 4.9 |
5.1
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| Woolston/Opawa | 7.2 | 7.4 | 7.8 | 6.7 | 6.2 | 6.0 | 6.2 | 6.5 | 6.6 | 7.4 | 6.3 | 6.4 | 6.6 | 6.8 | 7.3 | 7.2 |
8.0
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| Ashburton | 6.3 | 5.2 | 5.3 | 5.8 | 6.3 | 7.0 | 8.3 | 8.4 | 6.3 | 6.1 | 6.2 | 7.0 | 6.9 | 7.0 | 6.8 | 6.7 |
7.2
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| Timaru | 5.8 | 5.6 | 5.8 | 6.2 | 6.0 | 5.7 | 6.0 | 5.9 | 6.1 | 6.4 | 6.5 | 6.4 | 6.2 | 6.6 | 6.8 | 6.7 |
6.3
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| Queenstown/Frankton/Arrowtown | 4.3 | 4.2 | 4.2 | 4.3 | 4.4 | 4.6 | 4.3 | 4.1 | 4.5 | 4.3 | 4.6 | 5.2 | 5.0 | 4.8 | 4.9 | 4.7 |
5.3
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| Dunedin: | |||||||||||||||||
| Kenmure/Mornington | 5.7 | 6.2 | 5.9 | 5.4 | 5.8 | 6.3 | 7.5 | 6.5 | 6.3 | 6.7 | 7.9 | 7.1 | 6.6 | n.a. | n.a. | n.a. | n.a. |
| Mosgiel | 5.5 | 5.8 | 5.6 | 5.4 | 5.4 | 5.4 | 5.5 | 5.7 | 5.7 | 5.7 | 6.4 | 6.4 | 6.1 | n.a. | n.a. | n.a. | n.a. |
| South Dunedin/St Kilda | 6.8 | 7.3 | 7.6 | 7.6 | 8.6 | 8.0 | 7.9 | 7.5 | 8.1 | 7.4 | 7.2 | 8.0 | 8.2 | n.a. | n.a. | n.a. | n.a. |
| Invercargill | 8.3 | 8.2 | 7.9 | 7.9 | 8.9 | 8.3 | 8.3 | 7.9 | 8.3 | 8.4 | 8.7 | 9.1 | 9.0 | 6.7 | 9.0 | 9.2 |
9.5
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Source: Base data from REINZ / MBIE *Yield is a property's annual rent expressed as a percentage of its purchase price. The indicative yield figures in this table are gross, and are calculated from the REINZ's lower quartile selling price for three bedroom houses in each area during the previous 6 months, and the median rent for three bedroom houses calculated from new tenancy bonds received by the Ministry of Business Innovation and Employment for the same areas/period. This gives an indication of the gross rental yield that would have been achieved in each area if a three bedroom house was purchased at the lower quarter price and rented at the median rent for that area. |
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70 Comments
"Rents set to fall following drop in house prices
Tumbling house prices have not flowed through to lower rents for tenants, but this is about to change...
with auction clearance rates falling, the number of rental properties on the market was likely to rise as more investors opted to generate a return from their properties instead of selling them in a falling market.... what tends to happen is that people put their properties on the rental market to get a return rather than let them sit idle. So there's more available stock and this flows through into lower rents."
https://www.afr.com/real-estate/residential/rents-set-to-fall-following…
Yet.....
As a landlord, if extra competition comes into your area as failed selling campaigns put property back on the rental market ( any return is better than no return if you have fixed costs - mortgage etc), and they undercut you to attract your tenant (your present income), what will you do?
(NB: At the risk of flogging a dead horse, that's why % rates are going lower - to shelter stressed landlords from falling rental income, and that, in itself, will feed lower rental prices. Dog chasing its tail stuff...)
The banks are dropping interest rates and making less money so they can help out poor distressed landlords... Yeah... nah.
You also assume all these houses for sale are unoccupied. A lot of the houses for sale are already occupied by the owners or renters. A lot of the owners/landlords are just having a crack, why wouldn't you given the current house prices.
Don't let the truth get in the way of a good story.
https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=12…
bw I dont think that is a concern where we are. What I am seeing house prices are rising here in Hamilton, last year houses that couldn't sell are selling and those that did are reselling for more. We know the rental business very well from over the long term and as stated below we are witnessing much stronger demand from prospective tenants. The central government is having an effect on the market and it is not what they would have hoped for haha
Most landlords have benefited from falling mortgage rates. Only a tiny percentage have bought rental properties in the last 12 month and most don't even bother calculating their yield percentages. So mortgage rates going down and rents going up translates to more actual cash in landlord's pockets.
This article is really just an advisory for investors thinking about entering the market and a message that all is stable out there with yields equaling the best term deposit rates.
This investor driven boom will be coming to an end soon for the rest of NZ. Auckland has already come off the boil and the rest of the country will soon follow. Lets see how many investors will want to be negatively geared in Auckland and many other parts of the country with Labours policies in place, sluggish wage growth, a downturn on the horizon and no capital gain in sight for many years to come. Lets see how many will want to hang in there subsidising tenants rents and if interest rates go up that will push many positively geared investors into neutral, neutrally geared investors into negative and negatively geared investors into trouble.
Adam B NZ
What absolute rubbish.
Your argument is based on a false premise - "This investor driven boom will be coming to an end soon".
RBNZ figures indiucate that investor activity decreased at least three years ago; in September 2015 5997 mortgages were to investors whereas in September 2018 this was 3114 - a 49% drop. This fall in investor activity is most likely due to the low yields and LVRs. Given Auckland's house prices, lower yields, and a fall in likelihood of capital gains for some years, the fall in investor activity is most likely to be a lot higher than the 49%.
And don't over estimate the significance of investors in the market - they currently account for slightly less than 15% of mortgages and investor activity in the high end of the property market (which first took off) was never significant for investors.
The Auckland house price market has been relatively flat for the past few years and the main drivers for maintaining current prices - given that investor activity has decreased considerably - are continuing low interest rates and especially significant to the Auckland market, historically high levels of immigration and housing shortage. These were also the key drivers for triggering the boom beginning in 2012.
It will be most likely a significant increase in interest rates and a considerable fall in immigration rates that will trigger any significant correction to the property market in which case, for economic stability purposes, RBNZ is likely to ease LVRs for investors.
Investors did well in the period 2012 to 2016 in Auckland with capital gains and they influenced the market but those days have long gone hence the 49% fall in investor activity over the past three years.
However Adam, if you like, don't let the facts get in the way of your prejudices.
It's not absolute rubbish at all. You have just misinterpreted what I have said.
Investors came off the boil from 2016 in Auckland but many went to the regions looking for rentals with better prices and yields.
Investors played a big role in this last boom and now the ripple effects are slowly dying out for the rest of NZ as prices have increased in other cities and areas.
This recent boom has seen every man and his dog wanting to become an investor as property gurus and courses increased massively over the 2012 till now period and many are still preaching the buy now narrative.
Does the RBNZ data account for non bank lending as I hear this has increased significantly for investors over the past few years. Send through the link so I can check it all out as haven't viewed for a while.
The RBNZ probably wont ease the LVR's too much and it will do little to ease the pain of servicing if interest rates go up and migration slows down. It will help with lending if prices are dropping though.
Morning RP
Looks like the Housing market has been given an enema overnight. There's all manner of crap coming on!
'National unsold housing stock (realestate.co.nz) had risen from 36,775 at 4pm yesterday to 37112 this morning. This really is gathering pace.
Auckland Unsold housing stock (realestate.co.nz) has risen from 13,858 at 4pm yesterday to 13,967 this morning.
https://www.youtube.com/watch?v=YmM4uipky2o&t=370s (DFA Australia about the regulatory bodies)
The Aussies have this week re-appointed the head of APRA for another 5 years. Given how bad the quality of bank regulation has been over the last few years, some of which has been unearthed by the Royal Commission this seems a very strange decision if you ask me.
Six months on from this article, where are we now? Still a lot of work being done to support the banks and their 'Ponzi' housing finance.
If rental yields only just equal the best TD atm, in a flat market, with all the extra hassle and reduced liquidity of property investment why would anyone buy a property investment right now?
PI also has significant liabilities compared to TD, legal fees, re-financing costs, maintenance, risk of changes to government legislation, void periods, management fees, insurance hikes etc etc
I think I agree with TM2 and other PI who comment here that as a PI you make your money when you buy. Get something under market value, with a strong yield etc. I am not one to demonise property investment because we need rental properties. It's specuvestors who pose greatest risks to price stability and escalate bubbles.. but surely neither the specuvestor or the buy/hold investor are going to purchase if a yield is at parity with TD's when capital gains are unlikely in the short/medium term with some risk of capital depreciation and in addition one hell of an opportunity cost if you money is stuck in a sluggish housing market.
In the same vein, try out the sums on farming ROI at current land values, I can't figure why anyone would persist when selling what your ancestors paid for decades ago and living off the proceeds makes about the same income minus the slog and the financial liabilities. It sort of explains why there are so, so many farms being sold to sons/daughters in shared equity type sales, ie: they pay it off over time 'cos no-one can get a loan to pay for it elsewhere.
gingerninja - you say that you make your money when you buy, that only works if you sell for more than what you paid. Most of the sheep Property investors out there do not know when to sell because they follow the advice of the Mainstream media. So they will loose in this GFC2,
Freepopcorn. Not me personally. I would hate to be a PI, but I mean, generally, GFC's and massive housing corrections aside... the professional PI's out there tend to buy below market value.
The problem with housing booms is that everyone with any capital, who can get credit, ploughs in and then suddenly it's not about investment fundamentals, but sentiment driving price appreciation... which is nowhere near as reliable as good maths!
Those who rationalise and support current high prices claim that unless interest rates rise or immigration reduces there will be no housing correction, but that isn't necessarily true either. Credit tightening, economic slow down and sentiment can also trigger price corrections. In addition, all the above factors are now global concerns.
I don't claim to know how all this will play out. I have positioned my finances for volatility and am currently risk averse. There are too many factors to ignore.
There will be tears:
Olly knows what he's talking about. Agreed, the cheap credit driven boom has continued way longer than expected and dangerous complacency has now crept in. The $$ amounts and jobs at stake are now larger. It's all about property these days! Olly's scenario (I think inevitable) is absent a global shock too.
Agent TTP and BLSH, now's good for stocking up on tissues!
I am anticipating a near perfect storm, with the baby boomer demographic needing to fund retirement homes or their kids selling the inherited portfolio when they drop off their perch, being a landlord going into the "too hard basket" as building WOF comes along, new owners realising how crap these old houses are so waiting for a better deal, values beginning to drop off the peak sparking profit taking, foreign input diminished and the housing shortage miraculously evaporating as lots of empties come on the market for all the above reasons. But I could be wrong, nothing a free flow of new migrants won't fix, I think we would be better off with about 15 million population, build some new efficient cities and retire the old colonial ones we have now to be quaint seaside retirement villages for the nimby's. Maybe it will temper this fixation with dairy exports.
RickStrauss
The coming retirement crisis. Too many people taking on more risk than they understand. This is quite a sobering reality for New Zealand future and is why the gambling in property began.
The models for much higher population on much smaller land are common throughout the world. In NZ we have largely persisted with the farming methods introduced by the first european colonists and straying from this invites ridicule from the old guard as did the first vineyards. Ask this, if dairy export was to become unprofitable what else would we do with the land it now occupies? I know most would blurt out "change to sheep and beef", if you asked them to think of something else I suspect many would have no response. We have plenty of fertile land, it is just covered in grass.
More poor thinking. The colonist model was grass feed, small holding, much less impact. In fact retaining such a model and going full organic would have created a premium highly priced product - and supported a popn of 3-4 mill.
But I guess in your nirvanna of 15 mill people such a model won't work huh?
If diary was not economic (as it will be soon) we would find alternatives, activities and industries to replace it.
The problem we have is mr key and his loonies bet the house on diary (another version of Muldoons think big...Nat again) He cashed up our power companies, threw all the cash at damns and irrigators and encouraged all to go into debt over it.
The big wet dream of a banker looking after bankers.
I think you are mistaken Spinach - much of NZ is mountainous and unsuitable for agriculture, and only around 5% of NZ is top quality arable land suitable for horticulture, and that's under threat from urban sprawl.
If you are looking for alternative land uses, some dairy land could be converted to horticulture or arable use (but we would need much more irrigation, good luck with that). Best use for hillier country is sheep and beef, apart from that it's only suitable for forestry or manuka honey.
Most countries that have high populations on small land masses are not self sufficient in food production. The Netherlands could be an exception, but even then they are bringing in food for their livestock from other parts of Europe and even shipping out the manure also, and there's no benefit to NZ in adopting that type of housed, intensive factory-farming type system.
a) NZ produces food for 20million people, so most of our food is exported to the countries that cannot grow enough of their own. b) Intensive farming is done by throwing huge quantities of fossil fuel and water at the "problem" however we are past peak oil and its gone by 2040~50 ergo most countries wont be able to feed themselves. Water is showing signs of stress as what is left is too deep to afford the pumping costs and/or Climate change effects demand an even greater water use.
I see your view parroted by any number of folk who may be more comfortable with their own company than that of others. "Wrong" is your subjective opinion as is "better", once again the examples of relatively isolated lower population communities are common place, most could be described as at subsistence and dwindling rather than thriving and inhabited by folk who are escapist or disinclined to sharing. A comfortable level of population contained in efficient communities would be preferable and I believe NZ has some scope for improvement on the current layout, the number I quoted was simply speculation. Having said that I believe we have overpopulated this earth with humans and it is the height of hypocrisy that we do not aggressively control our own species in the same way that we do all others on the planet, even down to our gut microbes, simply at our whim in what we perceive our best interests.
We don't need popn growth to go from 4 mill to 15 mill to not be in ones 'own company' as you put it. Move to Auckland and share a flat if you want company (or sleep on the streets..even better).
Low population is what? If you haven't observed, most with high population are in big trouble. Low is good. High is not. NZ was good...now not so.
I too do not support rampant population increase through immigration or otherwise. However, I find the argument that yesterday NZ was so good because there were not as many immigrants in the country, fundamentally flawed. NZ was very prosperous due to extremely favorable trade terms that it enjoyed with GB. When the world changed, and NZ was denied such privileged trade position, that prosperity starts to disappear. That economic model became unraveled and NZ has been in trial and errors ever since to find a suitable replacement with varying degree of success.
Just to say yesterday was better because there were less number of people in NZ is flawed and just helps to fuel emotions. I am myself against an immigration policy that is intended to bring in highly skilled people but fails to do that and instead brings in thousands of low skilled immigrants. But my disagreement with that policy does not mean that I think all NZ problems will be gone if there are no immigrants.
What new export industries are you going to magic up to support your 15 million population Spinach? Primary products and tourism make use of our natural advantages (scenery, climate and low population), film-making and export education are only viable because of massive subsidies.
One of headliner sales from recent "legendary" B&T auction results were 81 The Strand (Onetangi) sold for $2,750,000 with CV 3,700,000 (whooping 950k less than CV ) and another one was 70A Selwyn Avenue, in Mission Bay sold for $3,060,000 with CV $4,150,000 (1,090,000 less than CV) . (source is here https://www.oneroof.co.nz/news/aucklands-auction-clearance-rate-drops-t…)
Those sales probably made those higher averages but it looks like we need to have a bit more of popcorn supply soon
andreas_od
We're seeing a margin call. Be first, sell it all when the music stops.
Good to see my local Tasman mentioned in the comments. Sure it looks as if ROR is going down. But hold on how are these figures calculated. The average rent divided by purchase price of properties is not the way to do it. The ROR needs to be average rent divided by the purchase price of RENTAL PROPERTIES. Tasman has one of the lowest ratios of rentals to owner occupiers. It would be nice if REINZ could separate out investment property prices. Sure in places like Tasman the rental market is dominated by stand alone three bedroom houses rather than apartment blocks so the statistics need to reflect market reality. Feed rubbish in you get rubbish out. Come on you statisticians turn the light on, shut down the computer, get your pencil out, and start looking more carefully at what is happening. I have seen some recent sales go through at 8% Gross ROR for blocks of flats. They are hard to find and there is lots of competition.
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