by Jenny Ruth
Most of the signals coming from Auckland's residential market suggest it's an excellent time to invest there.
To begin with, sales activity is up strongly, but median house prices are still flat. The Real Estate Institute's figures showed the 2,288 sales in Auckland in January were up from 1,968 in December and 1,450 in January last year.
But the median price in January at $245,000 was down on the $253,800 recorded in December and only slightly higher than the $240,000 in January last year. The pattern was the same across the wider Auckland region with North Shore, Waitakere and Manukau median prices falling from December levels.
Low unemployment, increasing net migration, low interest rates and emerging inflation are all suggesting the time is right to invest.
Even more crucial, real estate agents report a shortage of rental properties and that rental levels are therefore starting to move higher.
Wendy Gilchrist, property manager at LJ Hooker's Birkenhead office says although demand is strong in the $200 to $450 a week bracket, "there's very little stock to offer anyone thoughout the whole North Shore." There's still plenty at higher rental levels.
A property previously commanding $260 a week in rent can now be let at $280 or $290, she says. These developments are still very recent - the market only began to pick up from about December, Gilchrist says.
Her colleague Pam Snowden at LJ Hooker's Remuera office says demand is "extraordinarily high" and any decent rental properties "are just flying out the door."
Helen Hodgson, Auckland property manager at Barfoot & Thompson, says that although there's "a huge shortage" of rental properties, recent media hype about the situation isn't helping the market.
Some landlords are expecting to be able to charge "absolutely silly" rents. While tenants will accept an unrealistic rent if they're desperate, they are likely to quickly move to something more reasonably priced, she says.
Harcourts' Auckland rental manager is so fed up with the media hype, and what she claims is misreporting, that she won't comment at all now.
Kieran Trass of Mortgagenet, who specialises in dealing with property investors, says he thinks the squeeze on the rental market has partly been caused by the government's move back to income related rents in state houses.
While through the 1990s, there were often reports of several families sharing a house in order to afford the rent, now those families are able to afford houses to themselves.
"It's added to the pressure on rental accommodation. It's fantastic if you' re an investor," Trass says. People advertising a rental property are getting about 30 calls from prospective tenants.
Trass reckons there's a boom coming and that it's only just starting.
"Rental levels are only back where they were six years ago," he says.
He cites the example of a two-flat property in Mt Eden. Its rental value was assessed at $860 a week back in November. It has just been reassessed at $1,150 a week.
The magnitude of rent increases depends very much on the quality and location of the properties. Some rents have risen only 5%, others are up 25%, he says.
But Auckland landlords have been reducing rents for the last five years, Trass says.
So why haven't house prices started rising yet? "There's still a bit of uncertainty about our economy," but a lot of people are looking, even if they're not quite ready to write the cheque, he says.
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