Christchurch rental properties are the most
sought after in the country (New Zealand Herald, 2014) . Canterbury continues to have the fastest-growing rental
growth in the country, up nearly 15 per cent in the year to April. Post-earthquake housing shortage and rebuild
activity continued to affect rents, which were likely to reach Auckland levels
by the end of the year if the trend continued.
In Christchurch houses
with five or more bedrooms saw rent rises of 4 per cent during the year at $643, and 5.2 per cent for four-bedroom homes at $501. The
average rent for three-bedroom houses rose 4.5 per cent to $388, 4.2 per cent
for a two-bedroom home at $337. and 3.4 per cent for a one-bedroom property at $261. Auckland's rental growth by comparison was about a quarter (HARRIS, 2014) .
The large demand from people requiring
houses for accommodation after the Christchurch earthquake without the abundant
supply has raised the price for rental property. The large housing demand by earthquake
offers a reliable tenancy base for property owners. Rental property investors in Christchurch 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 (Harris, 2014) .
Christchurch’s average weekly rents for the
three months to April were $431, nearly 11 per cent higher than the same period
a year ago. Auckland's house prices had grown
13.5 per cent in a year, 28 per cent since the start of 2012 and were 50 to 56
per cent higher than the other regions (HARRIS, 2014) .
The successful rental yields
are attributed to economic model of supply and demand. There is a high demand
for residential rental properties in Christchurch currently created by a
continuous demand for earthquake victim’s accommodation and a recent demand for
Christchurch rebuilders. 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 (Chaston, 2014) (Harris,
2014).
Buying a house in the current
property with debts has become very expensive. This is a direct result from the
Reserve Bank initiating restrictions on low equity mortgages in October last
year. The Reserve Bank restricted the mortgage market, making mortgages with a
deposit of less than 20% difficult to get. This impacts first home buyers who
are mostly unable to purchase property. The LVR has affected mainly the lower
value properties in the market (ONE
news, 2014) . The Reserve Bank initiated this restriction in an effort
to control the market for the country’s long term benefit. This is
macroeconomics as it adjusts the market behaviour directly (Reserve
Bank of New Zealand, 2013) . Therefore with LVR restrictions first home
buyers will be deterred from purchasing a new house without proper funding.
Prospective first home buyers will look to rental properties instead of
purchasing as LVR restrictions do not affect the rental property market (Chaston, 2014).
Welly Real Estate should invest in
residential property for rental opportunities. Due to LVR restrictions
throughout New Zealand Prospective first home buyers will look to rental
properties instead of purchasing as LVR restrictions do not affect the rental
property market. This creates a large opportunity that Welly Real Estate could
invest in.
Harris, C. (2014,
May 29). Canterbury rents set to hit Auckland levels. Retrieved June 5,
2014, from Stuff: http://www.interest.co.nz/property/rent-or-buy
New Zealand
Herald. (2014, January 18). Christchurch rental property demand soars.
Retrieved June 5, 2014, from New Zealand Herald:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10779460
Ninness,
G. (2013, December 21). Stuff. Retrieved April 2014, from
http://www.stuff.co.nz/business/money/9539298/Insider-guide-to-investing-in-rental-property
ONE news.
(2014, April 24). LVR taking a chunk of low price sales out of housing market.
Retrieved May 1, 2014, from ONE news:
http://tvnz.co.nz/business-news/lvr-taking-chunk-low-price-sales-housing-market-5939958
Reserve
Bank of New Zealand. (2013). Loan-to-value ratio restrictions. Retrieved April
26, 2014, from Reserve Bank of New Zealand:
http://www.rbnz.govt.nz/financial_stability/macro-prudential_policy/5393159.html
