As more New Zealanders make their way home, the country is witnessing an increased demand on an already strained rental market. This combined with a high number of people unable to afford to buy a home, this has put pressure on the available rental stock in Taranaki. Despite more affordable loans and increased government assistance in purchasing a residence, the simple lack of supply is presenting a unique challenge within the region.Citizens are returning and deciding to stay in New Zealand in record numbers, and New Zealand now has its highest estimated resident population of 5,002,100 as of the 31 March 2020, according to stats.govt.nz. While this increase is being handled easily by some regions, Taranaki is struggling. Back in May of 2019, the Taranaki Daily News highlighted stories of people resorting to living in local campgrounds due to the simple fact that not enough rental properties were available. So while a national rental crisis has been seen in the wake of COVID-19 it’s a crisis Taranaki has felt more than many.
According to rental figures, there is a particular shortage of three-bedroom homes for families to rent. A recent article from Radio New Zealand reported one recent property viewing in New Plymouth, which saw 53 applicants view a very standard three-bedroom home with a double garage. These figures, and stories, are proof that the rental market is seeing an influx of people desperately in need of a home.
In short, there are not enough houses in Taranaki available to rent, due to the demand outstripping supply. According to TradeMe, as of the 9th of June 2020, there are currently 98 properties available for rent throughout Taranaki with 94 of those in New Plymouth, 3 in South Taranaki and 1 in Stratford and while that may seem like a lot, it is nowhere near enough to meet the demand. These numbers are evidence of just how strained the market is throughout the Taranaki region.
There’s a definite, if seemingly disconnected, cycle in our local housing market that has created this perfect storm. There are people with the money to buy, but many are first home buyers looking for housing that is under $400,000 so they can access additional government funding to support their deposit. These homes are being held onto by people who are either happy or who cannot find houses in the $500,000 price bracket to move up into. In this price bracket, are larger family homes or newer build 3 bedroom properties. Without more housing developments, or new build house and land packages being built in desirable locations, there’s a bottle-neck at this mid-level price range. In addition, is the increased demand from investors wanting to add to their portfolios.
With strong demand across the region for affordable, as well as higher-end rental properties, there are simply not enough properties to go around. This opens up an opportunity for those looking to start or expand their property investment journey, which is a smart move for those wanting to make a passive income, all the while holding on to an asset that may increase in value over the years. If you’re interested in learning more about investing in Taranaki then our Ultimate Guide to Investing is a great start. Check it out here.
While some investors are seeing uncertainty, there are many who are seeing opportunity. Looking back over history, every downturn in the investment market has recovered, with a benefit if you can hold onto the investment for long enough. The skill is knowing when to buy and sell and when the market has reached an all-time low or has peaked at an all-time high.
May 2020 has seen an all-time high in the average asking price for a home in Taranaki. Currently sitting at an average asking price of $504,887, according to sales website realestate.co.nz. This is 16.3% up on May 2019 which saw an asking price of $433,977. So while the outlook might seem uncertain there’s evidence that while other areas are struggling with falling demand and a lack of interest in properties; Taranaki is not one of these regions.
With interest rates at an all-time low now has never been a better time to buy a property, if you can. With some banks only requiring a 20% deposit for investment properties, or buying if you have an existing property by using equity, you may be able to cover more of the deposit. The criteria for a deposit will differ between lenders so it pays to contact your lending provider for more information. So with few properties on the market and a hot rental market what options exist for someone looking to grow or start their investment portfolio? Below we explore one option:
Build and grow
There are several house and land package options in Taranaki. From low-cost new builds in companies like Manor Build to mid and high range in Location Homes, Signature, Landmark, Golden Homes and even more. By choosing to build your new investment property you’re guaranteed to comply with the new Healthy Homes act, you’ll be able to attract a tenant willing to pay more each week and your asset will retain its high value. It also has the potential of resulting in less work. Save in the long-run
With property prices heading upwards in the region and competition rife at almost all but the high-end of the market, building your next investment property may be a good option. As returns are of paramount importance with any investment saving money and increasing returns may be more viable with a new build than a comparative existing property.
If you are thinking about using this time to branch into property investing or unsure whether or not now is a good time to sell your rental property then we are going to leave you with the words of one of the worlds most influential investors Warren Buffett. “Learn and adapt to change and don’t get emotional (which is probably the hardest investment challenge). Predicting rain doesn’t count but building an ark does. We may not know when the change or crash may come, but we can be smart and develop a forward-thinking strategy.”
For more information about investing in Taranaki then download our ultimate guide, it is packed with everything you need! Click on the image below.