Rents are rising rapidly due to a shortage of rental housing. They are increasing an average of $30-40 per annum in Hamilton at the moment, thanks to high demand for rentals and the shortage is likely to grow.

ANZ’s recent business survey showed a collapse in residential construction expectations, to the lowest level in 10 years – to GFC levels.

“New Zealand needs more houses, but the construction sector is facing cash-flow and credit constraints. Despite the small sample, the data has been a pretty good indicator and suggests significant downside risk to the residential investment outlook,” said ANZ New Zealand chief economist Sharon Zollner.

Construction is hard work.  It’s expensive, time consuming, requires large numbers of skilled workers and entails businesses taking on large amounts of debt.  For this to happen, business owners need to be confident about the future. That’s a hard ask with the muppets at the wheel right now.  This government is more focussed on trying to look good than doing anything to assist businesses, which is why business confidence is so low across all industries.  A ‘Wellbeing Budget’?  What a joke.  Are they running a country or a kindergarten?

With residential construction intentions continuing to trend downward, it’s likely new housing construction has peaked, or will do shortly. This will put more demand on housing.

Here’s a summary of the positive factors supporting rental growth and underpinning house prices today:

• population growth remaining elevated
• interest rates are low and heading lower (3yrs 3.89%)
• Capital Gains Tax off the table.
• LVRs likely to be eased a further 5% this year to 25% for investors and 15% for home buyers
• Rents are rising rapidly
• New housing supply is peaking and likely to head lower

If you have money to invest then residential property still looks pretty good. We have property for sale right now that yields 7.5% gross, about 5-5.5% net. A better return than money in the bank, and you’ve still got the upside of capital gain.  And what’s more, by purchasing a new investment property off-the-plans, you are increasing the number of warm, dry, healthy homes available for tenants to rent, so it’s a true win-win.

John Kenel

Assured Property Investments