The latest CoreLogic figures say the average Auckland house price has hit $896,676. That’s very close to the peak of where property prices should be based on the 8% growth line discussed in the last newsletter. The prices will probably go higher, as the fundamentals of supply and demand have not been met and there is still a shortage of properties compared to the number of people, however in my opinion buyers are in gambling territory now. You should expect the 8% growth over the year and chances are that it will be higher but based on historical property price trends Auckland prices are now very close to where they should be. Last newsletter it looked like Auckland was still 16 months away from its peak. I now believe that’s more like 8-12 months. The catch up period is over for Auckland but it is still there for the provinces.
Price growth has hit 7% year on year. The average Whangarei house is now worth $362,021. That’s currently an average growth rate of around $2,100 per month and this is predicted to accelerate.
In the last newsletter in September, Whangarei’s property growth was 4.6%, so over the last two months this growth has accelerated dramatically and is predicted to continue to do so. It should hit double figures by the end of the year. Hamilton has already hit 14.9% annual growth and Tauranga has hit 11.2%. Auckland is sitting on 22.6% growth but the gap with the provinces is starting to close. The growth continues to be associated with places close to Auckland showing the ripple effect discussed in an earlier newsletter. The one surprise is Rotorua which has property price growth of just 2.3%. If I was to guess at the next place in NZ to benefit from the Auckland price ripple it would have to be Rotorua.
I had a discussion with Mel Lindsay the manager of Harcourts Just Rentals to get the latest information about the market. This market is also going through some serious changes, most of which are good for the landlord.
Key points are:
- There is a serious shortage of rental properties out there. There is still resistance to the low priced poorer socio-economic areas and poorly maintained properties, however there is huge demand for the middle and better areas.
- Tenants are staying longer! This is great news for landlords. The most costly period for any landlord is tenant change over time. This is when you lose income and end up spending money on the property to fix those items that where ok for an existing tenant but need replacing for a new tenant.
- The shortage of properties and tenants staying longer are probably linked. When you don’t have a viable alternative, you stay with the existing option.
- The shortage is being made worse by the accidental landlords, the ones who couldn’t sell their properties so rented them instead, now selling their properties, leaving the market to the long term and serious landlords.
- Vacancy rates have dropped close to zero. This is the down time when the property is between tenants. As a landlord you want this time to be as short as possible. In a traditional market a company would be proud of a vacancy rate of 2-3 percent. Harcourt’s Just Rentals are currently running at 0.06 percent which is a very impressive figure and great news for landlords.
- Rents are on the way up for most properties. Rents have been edging up due to supply and demand and this is expected to accelerate over the next 12 months. Mel has asked me to express a word of caution here. It’s not across the board and poorly maintained properties and properties in poorer social-economic areas have not seen the same increases.
- When a property is vacant the rent can be raised quickly but when occupied it should be raised gradually and regularly so the tenant doesn’t get “rent shock” and leave.
- The Whangarei Hospital is in its recruitment season so there are a lot of medical people looking for accommodation right now. These people have to be within 25 minutes’ drive of the Hospital. Surprisingly, with the new bridge, the Parua Bay area is a major beneficiary with 4 recent requests for homes in this area. Call Mel if you can help. (021347355)
- Harcourt’s Just Rentals have been listening to their landlords and tenants and have researched and implemented a team approach to property management. They call it the” Pod System”. Each property now has two portfolio managers. A lead manager and a back-up manager. This means at least one manager, who knows the property, is likely to be available for landlords and tenants requests and the key decision making, such as rental levels, is done using two heads rather than one. Problems are solved quicker and sickness and leave are fully covered. The teams are saying the results have lifted their level of customer service and satisfaction significantly.