While newspapers and other mainstream media seem to print the same articles every day about the ongoing rise in house prices data shows that rental increases are much more modest. The Trade Me Rental Index showed only a $10 rise on the median prices across NZ in the last 12 months to July with a 4.8% increase on 12 months ago. Auckland was even lower with just a 3% price rise or an average of $15. This suggests that the low interest rates could be a determining factor in increasing house prices as this is indeed happening in different asset classes across the globe including the sharemarket as investors strive for better yields. Obviously this factor doesn’t tend to have the same effect to rents.
It will be interesting to see how the 40% deposit rule affects the supply of investment properties onto the market as we have been hearing anecdotally that investors have pulled back. This did happen after the previous lending restrictions were implemented so this may only be a temporary change. Expect investors to potentially start targeting new builds with the exemption to the deposit restriction and this restriction being relaxed with the Reserve Bank allowing properties that are purchased within 6 months of code being issued to be classified as new. For this reason if you have properties in areas with New Build supply coming on make sure that you keep your property well presented and maintained as you may have new fresh properties as competition in the next couple of years.
Expect over the next 12 months or so leading into the next election for property to be a major discussion point and for rents and potentially further restrictions to be part of this. In attending the recent REINZ Conference it was quite clear from some of what was presented that this market will continue to get further regulated. This will have both positive and negative flow on effects as regulation tends to raise the cost of doing business through increased compliance costs however this should create a more professional environment for Landlords, Property Managers and Tenants overall.
We will continue to update you as we learn more or contact us now to have a chat about how these changes may affect you and your rental property.