3 Comments 3 Commentsby Benn Bathgate
The potential yield boom hinges on whether the Government will buy damaged housing stock then sell-on at a discount and also restore the city's infrastructure.
"If the infrastructure is taken back to what it was on February 21 the indication that we have is that rental levels would stay virtually the same as they are now, but because you've purchased the property at the lower purchase price, even with repairs and refurbishment, its substantially lower than what the house was originally worth, but your rental is still the same, your yield has automatically gone up," a Bayleys spokesman said.
Bayleys Karen Philips said if the properties were acquired by the Government, then sold at a reduction, it "will open up opportunities for property developers and investors returning to the market."
"However, these opportunities of course depend on the Government, the EQC or insurance companies, on-selling the properties in an ‘as-is, where-is' basis, and allowing for redevelopment and reoccupation rather than abandonment. At this stage, the big unknown is just what land will be deemed recoverable , and what land would be deemed to be written off," she said.
Demand for rental property in the area was already high before the earthquakes, and with rents largely unchanged Bayleys believes if homes were sold at a considerable discount - and investors had the cash to make the necessary renovations - there could be considerable yield benefits.
"Investors could come in and say I can buy the property for 20% to 30% of what it was worth, spend X% getting it into a habitable state, the Government comes to the party in repairing the infrastructure, then the indications that our residential letting team is getting is that rental levels would be virtually, if not exactly, the same as they were on February 21. So if you were getting a three-bedroom home for $300,000, renting between $300 and $350, work out what the yield would be. Now work out the yield on a $150,000 home on exactly the same rentals," a Bayleys spokesman said.
Another key plus Bayleys highlighted for the property investor is people's willingness to rent in areas they would not consider buying in.
"Someone doesn't want to own a property on a fault line but they're willing to take the chance that the house is relatively stable and habitable, it's perfectly livable, just that it's right on the fault line, they might say I'm prepared to move back into the south east suburbs, and that's where the investors could come in."
Philips said Bayleys had already seen increased interest from investors.
"People are thinking this could be another time to get back in the market, the problem of course is finding the stock," she said.
Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz
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Is there any other landlords in the same position as me, so we can all band together to gat something done about this bullshit system we have to put with?