The end of the year is fast approaching, 2018 is just around the corner and the New Year brings with it uncertainty, change and potential opportunity for NZ Landlords and Property Investors.
Auckland has experienced extensive capital gains over the last few years and we have now reached a stage where Auckland is considered to be very expensive and out of reach for a lot of buyers. From an international standard looking at household debt to income metrics, Auckland is considered to be on the extremely unaffordable end of the scale.
The latest Auckland GV’s are due out any day now and they have just released data which show’s Auckland property values have on average increased by 45% when compared to the 2014 Government valuations, now taking the average house value in Auckland to $1,076,000. This combined with the ever increasing regulatory environment, it stands to reason that a housing correction may well be on the horizon, but while there may be a temporary slump, Auckland house prices will not go down in the long run, but for the foreseeable future they won’t enjoy anywhere near the rate of growth that was experienced in the last 5 years.
That said though, it also indicates that some of the positive aspects that aren’t always apparent when you have a slowing property market may also be on the horizon, offering with it potential opportunities and benefits for Auckland Landlords.
Wage growth, lower unemployment rates and a construction sector that won’t hold up to demand in an under supplied market seem imminent for next year. Those factors combined, could mean a limit to how much Auckland property prices come back for 2018. It could also mean the potential for better yields and affordability and the chance for rents to increase considerably. The relaxing of the LVR restrictions could also be a possibility for 2018 and are currently being reviewed by the RBNZ as mentioned in this interest.co.nz article.
Today Trade Me released their latest Rent Price Index which shows that rental supply has already decreased by 50% across NZ and 35% in Auckland in the last year. Auckland rents have remained fairly stable over the last 2 years, with just a 2.9% increase in the last year and a now average rent of $525pw. If this trend continues though, Auckland could see significant rent increases in 2018.
Rising rents will be a welcomed relief for Landlords with the increasing cost of compliance and more to come in 2018. With the pending Healthy Homes Guarantee Bill, the potential for a property WOF, a legal framework that has seen good Landlords having to unfairly refund tenants thousands of dollars, the proposed removal of the no reason 90 day termination notice and the abolishment of letting fees, all or part of these changes could not only make the task of owning a rental property significantly more expensive, but also a lot more complicated to navigate. Tenants’ rights are increasing and we are seeing Tenants are more educated about these rights and are not shy about exercising them. I fully support the providing of rental properties that are warm, dry and safe, but Landlords should also be offered similar protection when it comes to having to pay for accidental damages which in some instances is costing Landlords excessive amounts of money for a Tenants careless actions. It would be great with the changes coming in 2018 if this gets addressed as was proposed under Nationals Bill.
Regardless, 2018 will prove to be an interesting year for Landlords and Property Investors while we all steer through the changes that are to come.