New zealand’s ‘rocketing returns’

House prices in New Zealand are soaring to incredible levels at the moment...

Property price growth continues in most of New Zealand’s regions, where up to an amazing 29% per annum has been recorded. At a similar pace, rental yields have undergone continuous rises creating profitable prospects for landlords and property investors alike.

A report carried out by the Massey University Real Estate Analysis Unit registered rises in median residential rent levels across the country by NZ$10 a week over the last quarter of 2007 to NZ$290. The report, based on data from the private rental sector and supplied by the Dept. of Building and Housing Bond Centre, explains that median rental levels stayed well ahead of inflation, increasing by 3.5% from August 2007.

Rental inflation increasing

According to Professor of Property Studies, Bob Hargreaves “Increases in rents over the last quarter are likely to be partly the result of demand pressure from net migration and potential first home buyers who are remaining in the rental market for longer than expected.”

Informetrics’ managing director, Gareth Kiernan, comments on how “rental inflation edged higher over the final quarter of last year as tenant demand for rental accommodation appears to be solid across all dwelling sizes.” And figures correlate his statement as the company recorded gross rental yields creeping up to 4.39%.

In January this year, the Real Estate Institute of New Zealand published latest home valuation figures, which recorded an increase in property sales of 6% compared to 2006. Some areas such as Ellerslie-Panmure saw 29% value increase and one of the country’s star regions, Gisborne, continued its good run with values rising 13% last year, closing a 4 year increase of 111%.

Bright future ahead

As with all global economies, New Zealand’s Reserve Bank Governor Allan Bollard has stressed his concern: “There has been ongoing turbulence in international financial markets. Despite this, the New Zealand economy is projected to keep growing reasonably well.”

New Zealand property is expected to continue attracting lucrative returns, whether through capital appreciation or rental yields. The country boasts political stability and a sound infrastructure already in place. Investment property purchasers are safe in the knowledge that the country does not rely solely on tourism, with the domestic rental market currently generating higher yields and returns alone.