Barfoot & Thompson stats for January show that, although the 12 months to Jan 2011 was well down on the 12 months to Jan 2010, the number of sales (583 to 563) and value of those sales ($290M to $294M) in Jan 2011 was pretty much the same as January 2010.
Anecdotally we have definitely noted a minor upsurge in conveyancing work, although we are still heavily weighted toward commercial and trusts compared to the work ratios pre the credit crunch.
Rents continue to rise, as does the number of properties let….but there continues to be a shortage of supply (somewhat obvious in light of the rising rents). It may well be that the perception of a relatively healthy rental market may tempt back some rental investors.
On the other hand, the increase in rents and shortage of rental properties could also be due to:
- the lack of capital growth in what has been a heavily negatively-geared investment sector (in other words, investors relied on capital gain and offsetting losses against personal income to balance the negative cashflow);
- the removal of large amounts of depreciation for residential property;
- fears of higher interest rates that will wipe out any cash surplus on a property even if you did manage to find one,
which basically means that residential property investors are having to buy close to cashflow positive and rely on inflation to slowly make a gain for them, or not buy at all.
It is not an easy task to find a cashflow positive rental. Vendors aren’t going to lower their prices just to accomodate the investor purchaser’s wishes, hence we have a rental property shortage.
There is no easy fix to this problem, and the government presumably realised that the depreciation changes were going to depress residential property investing especially given the economic climate. One suspects that the rationale is to force people in the direction of ownership as NZ tries to wean itself off property investing…..but with most banks keeping their loan to value margin low a lot of people don’t have the deposit they need. Rebalancing will take a while, and in the interim there seem to be a lot of people struggling to find places to live.