We’ve all been reading about NZ’s housing and no doubt you too have been wondering where the high number of dwellings needed are going to come from.
I’ve been doing some reading about an increasing investment area overseas that could go some way to help the housing shortage here – multifamily residential investment.
Multifamily residential is a class of housing consisting of multiple separate residential units within the same building or complex of buildings, for instance an apartment block. Investment in multifamily residential property is becoming increasingly popular in overseas markets, particularly the US. A multifamily investor would buy or develop an entire complex of apartments with the intention of keeping them and renting them out to multiple individuals or families.
With these multifamily investments come multiple distinct income streams which provide protection against losses – multiple tenancies are unlikely to end at the same time, meaning there is always money coming in.
Also, economies of scale would mean that the property management would be easier and it would be cheaper to manage and maintain an entire block than many individual units. Owning all the apartments in a block would mean an investor had control over maintenance, tenants and property management. If a tenant is disruptive and making life unpleasant for others, then it’s the investor’s decision whether to give them notice. It would be a lot harder if they had to deal with another landlord or property management company. The same with maintenance – the investor owns all the units, so can decide what maintenance is necessary when.
In the US, multifamily real estate includes single developments with hundreds of units, and some investment companies own up to 100,000 units across multiple sites. Multifamily investment on this scale has yet to begin in NZ. It may be down to the cost of building here or the high individual value of the units, meaning there is more profit to be made by selling each unit separately. But most likely, it doesn’t exist because no one has done it yet. The first multifamily residential investment in Australia is planned in Melbourne’s docklands. Private developer, Salta Properties, intend to develop and retain ownership of a 27-storey, 260 unit complex. It’s only a matter of time before we see investment of this type in NZ.
In the meantime, there are smaller investment options that offer similar multiple income streams. We have built and owned blocks of visitor accommodation apartments around Waikato hospital, an area with high tenant demand giving us very high occupancy rates. Unfortunately we don’t have any of these blocks for sale at the moment, but may build more in the future. Another option would be one of our popular multi-income homes. For a much lower price than an apartment block, an investor can enjoy the benefits of multiple income streams for the cost of a single family home.
It always interests me the way that the property market changes to fit the needs of homeowners, tenants and investors. Multifamily real estate investment could be an important piece needed to help solve New Zealand’s housing shortage puzzle.
John Kenel, Assured