Christchurch Stable Rental Market – Is it a Good Time to Buy? – April 2015
by Murray Ireland
We think it is a good time for Property Investors to purchase while interest rates remain low and residential property yields across Christchurch range in the 5-7% return.
World events and conflicts including; Ukraine Rebels, Syria war and mass migration to Europe, Islamic State, China and Australian slowdowns has meant that the world economy growth rate was revised downward in April by the International Monetary Fund. World growth has slowed to 3.2% growth for 2016 and 3.5% is forecast for 2017 as a result of downward pressure continuing and some increasing global risks (as listed above) as well low oil prices.
Brent Crude Oil is up to USD$50 as at 14th of April 2016. Oil is a great indication of the supply demand curve for world growth as Oil underpins almost every industry. When Oil got to USD$147 per barrel a few years ago there were subsequent food shortages world-wide as the cost of food rose as a result of increased petrol costs. So we can see today that oil at USD$44 means that demand has now dropped as there is plenty of oil supply.
New Zealand’s two biggest trading partners, China and Australia are buying less of our exports which have hit New Zealand especially hard in the Milk Powder export prices. It is of course hoped that Milk Export prices have bottomed but only in retrospect will we know for sure.
The Christchurch Property Market (source REINZ) prices have been flat over the last 12 months. There have been 1,199 homes sold in March 2016 which is an increase from 967 homes sold in February 2016 in the Canterbury/Westland region.
With the increase in the number of sales, we have seen more investment property purchasing resulting in an increase in availability of rental properties, up to 1,842 today on TradeMe.co.nz for Christchurch City. This is in comparison to a year ago where this figure hovered around the 1,400 properties available mark.
Consequently, we have seen rental amounts for all properties either drop or stabilise in Christchurch City. We see an oversupply of fully furnished properties which currently stands at 495 available today. We believe the demand for fully furnished has dropped considerably and this will continue. We do not envisage rents rising again for some time or at least until later this year or early next when the major government rebuild projects will be at full capacity and requiring more workers.
We believe it is still a good time for Property Investors to purchase while interest rates remain low and residential property yields across Christchurch range in the 5-8% return, depending mainly on location. World growth forecast will continue to hover around the 3.2% mark which means there will continue to be lowish interest rates offered in New Zealand. The Reserve Bank of New Zealand has projected the OCR to drop another 25 basis points later this year or remain at its current position until at least early next year.
Murray Ireland B.Tech (Manuf), AREINZ, ANZIM Director and Owner – Licensed Agent REAA
irelands Real Estate Agents and Property Managers
MREINZ | Licensed Agent REAA 2008