The following from Glenn Morris is an interesting comment on the tightening rental markets. I predicted years ago that the removal of building depreciation would bring a crisis point for many investors when their returns suddenly showed a profit. Now we will see what will become of it. It is high time for rents to rise and the ongoing low interest rates are the only thing holding them back. Once they start to increase, we could see a sudden hike in rents like we did in the early 2000’s. Read what Glenn thinks about it…
Glenn’s Rental Market Review
Well something strange is happening. The star performer Tasman District with just 68 TM adverts is one of the tightest markets in the country with a vacancy rate of 1.78% compared with Canterbury’s 1.36%. However Nelson is slipping. Nelson’s properties advertised in Trade me is has gone from 101 in February 2012 to 183 in February 2013 resulting in a vacancy rate of 3.97%.
Of course we all know that the boundary between Richmond and Nelson is just a line drawn in the sand by bureaucrats and the two are one city and one market but a lot of tenants do need to live in their chosen suburb. This unexpected surge is causing some difficulties with letting certain classes of properties. The one bedroom flats have vanished but I have sticking twos and threes.
So what is causing this? Perhaps some first home buyers are leaving the rental market, perhaps some small families are joining together to rent larger homes, perhaps some people have moved towns for work. And of course some people have moved into the ever expanding retirement villages. I have certainly seen all of the above. Not, mind you, in great migratory herds, rather in ones and twos gently melting the massive iceberg that makes up our market. Who knows what this means for the winter. All I can say is watch this space.
Meanwhile in the commercial market I have been jumping for joy with two good out of town firms competing with each other to lease one of my fringe CBD properties. The commercial agents say this is a sign of the times. As new firms come to town they will bring or attract new employees, all of whom will need houses to live in. For most of us it can’t be soon enough.
The other thing in the market that is causing a few waves, is a number of highly geared property investors that are trying to exit the market. I just wonder how many accountants have asked their clients to stump up a few thousand dollars in tax this past year. The National Government’s new tax to discourage private rental property investing is working and hurting. Hang in there investors. The penny will eventually drop. The Government is bound to soon to pay a consultant a few million dollars to figure out if you do not have a robust private rental housing industry you will soon have a housing crises. Overloaded housing leads to poor social outcomes and bad results in elections.
Socialist housing has not worked in Cuba and Russia. Why should it work in New Zealand?
Glenn Morris is the owner of Nelson property management company, “Glenn’s Vacancies”, managing residential and commercial investments. He is the current secretary of the Nelson Property Investors Association. He was active in the review of the RTA and is a well-known figure in the property investment community. He has a reputation for effectively managing difficult tenancies.”
