New Zealand Property Investors' Federation

The NZPIF is the umbrella body for 17 local Property Investors' Associations throughout New Zealand.

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Comparing cycles

The NZPIF Conference was held in Auckland last month and was a great success. Congratulations to the APIA organising committee for a job well done.

I had the privilege of being the first presenter and was asked to update attendees on the property market and where we are in the cycle.

It was very interesting to do the research and see how different this cycle is behaving compared to previous ones.

There are three key differences. The first is that Auckland is essentially the only area that has seen house price growth over the last three or so years. Prices in one region will initially start to grow but will usually be followed by other regions after a while.

However things are finally reverting to norm. In his conference presentation, Director of Research for Core Logic, Jono Ingerson, showed that prices in areas around Auckland are starting to move. Northland, Waikato and Tauranga have started and he expects other areas to move over the next few months.

The second key difference is interest rates. Looking at the two previous cycles, there is a clear pattern of interest rates increasing as property prices also increase. While this cycle appeared to be following this trend we now see interest rates not just stalling but falling.

The final key difference is in rental yields. As property prices increase they tend to do so at a faster rate than rental prices, so rental yields tend to fall. While you would expect rental prices to increase in line with property prices, demand for rentals can fall during a property boom. This is because potential first home buyers change their living arrangements to save on rental payments and save a home deposit.

While rental prices in Auckland have not kept up with house price growth, rental price increases have still been quite healthy at around 7% over the last year. Combined with slowly increasing rental prices in other parts of the country where house prices have been flat, rental yields have been quite stable over the past three or four years.

These three property cycle differences are all positive for rental property owners, which is nice given the regulatory environment being against us recently. The positive economic environment we are in seemed to be reflected in the mood of conference attendees, with a very upbeat atmosphere at the conference this year. It certainly bodes well for next year's conference in Taranaki, with many of the early bird priced tickets being snapped up already.

Another positive aspect of the conference were award certificates presented to outstanding committee members of associations around the country.

If you are one of the many volunteers for a property investors' association, please except my thanks and gratitude for everything you are doing. Our industry in general, and our members specifically gain a huge amount from your work.

It can sometimes be a thankless task as a volunteer, so if you are a member of a property investor association, please don't forget to show your local organisers your appreciation.


Tags: federation reports - andrew king