This has been quite a year for the Rental Property industry. Since 2008, the NZPIF has been saying that the housing market is likely to be quiet until 2012 and this seems to have been a fairly accurate prediction. While it is certainly early day’s, the housing market is now nearing boom like increases in some parts of the country and is likely to move in other parts soon.
There are a variety of reasons for this, including improvements in home affordability and a shortage of new building. Since 2008 the median house price for most parts of NZ has been flat, while incomes have slowly increased and interest rates have plummeted to levels not seen in decades. This has led to improvements in affordability, while projections that interest rates will remain low for a long period of time is giving the market a lot of confidence.
Another factor that hasn’t received as much media attention is the Kiwisaver first home owners grant. This scheme was introduced mid way through 2007 and recipients can get the largest benefit by being in the scheme for five years. In addition to the grant, buying a first home is one of the few reasons that Kiwisaver participants are allowed to withdraw their savings.
For these reasons it was always likely that 2012 would see an increase in the number of first home buyers and this is certainly occurring.
Although rental property buyers are still not out there in force just yet, increases in rental prices are improving rental yields in many parts of the country and encouraging more investors into the market.
Speaking to many investors at Property Investor Associations around the country and at this years conference, many members have already started to increase their portfolios.
Unfortunately the improving market has already led to calls that our industry needs to be rained in.
This is not helped by newspaper articles of people buying property to fix up and on-sell, but calling them property Investors rather than traders. There is a lot of confusion around the country of the differences between a property Trader, Developer and Investor. I wonder if these people who attend a seminar on trading and rush out to make their millions know that they will be taxed on their gains. I’m also concerned that the general population see these people as pushing up property values without paying tax and the buy-and-hold investor gets tarred with the same brush.
It is this type of activity which gives some political parties the ammunition they need to introduce a Capital Gains Tax, Warrants of Fitness and even Ring Fencing of rental property losses.
It is fascinating that some organisations see increasing the cost of providing rental property as a way of reducing the value of housing in general. It shows very poor research to the problems that they perceive are occurring in the market.
There will always be detractors of our industry and I’m glad that we have many highly skilled and dedicated volunteers with the NZ Property Investors Federation and Associations around the country. We owe these people a great deal of gratitude for proving wonderful education and a voice for our industry. The fruits of this will no doubt be felt by many as the market continues to improve over the next few years.