NZ's top places for property gains
Dunedin has proven to be the highest yield location for long
term New Zealand property investors. Student accommodation needs and the
Christchurch rebuild programme have been present in the city for some time,
driving up the yields. Dunedin had seven out of ten of the highest yielding
suburbs in the country.
Dunedin has a large student population that requires accommodation
within the city. The students need to be accommodated in relative close
proximity to the campus; students also are most likely to rent due to the lower
cost of renting for a few years rather than purchase a property. The large
housing demand by students offers a reliable tenancy base for property owners. Three
bedroom houses in the suburb of Hei Hei
were returning gains of up to 14 per cent capital gain yield (Harris, 2014) .
The Christchurch rebuild programme has
also been driving up rental yields recently. Christchurch currently has a
shortage of properties both for sale and rent. This property shortage in Christchurch
has created a surge in Dunedin’s rental market as demand has increased while
the rebuild takes place. The yield growth since the earthquakes in Dunedin has
been quite evident according to a report by Westpac (Harris, 2014) .
Rental property investors in Dunedin are
experiencing high profit margins. High profit margins can be expected from
rental investments because property prices are relatively cheap in relation to
the rental income received. Dunedin's suburb of Forbury had a yield of 8.3% on
the capital (Real Estate Institute of New Zealand, 2014) .
The successful rental yields are
attributed to economic model of supply and demand. There is a high demand for
residential rental properties in Dunedin currently created by a continuous
demand for student accommodation and a recent demand for Christchurch rebuilders.
The two competing renters have driven up rental demand. Dunedin
has always had a steady rental base from students that can be relied upon for
steady profit, now rental demand from Christchurch rebuilders has driven up the
property yields creating higher profits for the rental property owners. The
rental boom from Christchurch can be expected to diminish as renters return to
their city after properties have finished construction or more properties
become available to the market (Harris, 2014) .
Welly Real Estate will benefit from investing in rental
properties in Dunedin. With high rental yields on the properties capital gained
from other investors for low cost properties it is likely similar results can
be gained if property management was looked into for the company. With Dunedin’s
high demand for rental properties from students studying in Dunedin a reliable
long term profit will be attainable for rental properties. Multiple properties
will bring higher profit margins to the company. Christchurch rebuilders have
increased profitability to investors by increasing rental demand. The demand
increase may not be stable when Christchurch rebuilds and more properties are
available within Christchurch. Christchurch
has boosted the property yields on an already profitable rental market. Welly Real
Estate could invest in low cost rental properties in Dunedin with little risk. These
properties have proven profitable in the long term and should remain so with
the large student population continuously expanding.
Harris, C. (2014, March 27). NZ's Top Places for
Property Gains. Retrieved April 20, 2014, from Stuff:
http://www.stuff.co.nz/business/money/9870980/NZs-top-places-for-property-gains
Rel Estate Institute of New Zealand. (2014, March). REINZ
Regional Data March 2014 . Retrieved May 4, 2014, from REINZ:
https://www.reinz.co.nz/shadomx/apps/fms/fmsdownload.cfm?file_uuid=D18ABB95-71FC-469B-88BB-E60D8182AD1B&siteName=reinz
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