‘No end in sight' to rent rises, tenant bidding wars

More property investors are set to return to Auckland and will eventually branch out to other centres, according to BNZ economist Tony Alexander.

Friday, February 3rd 2012, 3:13PM

by The Landlord

In his Weekly Overview Alexander said the key fundamental - that construction has failed to keep pace with population growth - means good news for investors, if not for renters already struggling to secure accommodation.

"There will inevitably be more upward pressure on rents and more debate about affordable housing," he said.

"For renters it means no end in sight to bidding against each other, rising rents and eventually the return of more investors to the Auckland housing market."

Interestingly, Alexander sees the increased investor focus on Auckland leading to a ripple effect that will spread to other main centres.

"After that happens [increased investor activity in Auckland] the search for yield and presence of accrued capital gains to borrow against will see these investors taking a look at other centres."

Alexander dismisses the argument for opening additional land for development to ease the housing shortage, citing two main factors.

He says people come to or remain in New Zealand largely because they like the current living arrangements which offer easy access to rural recreational environments.

Also, New Zealand's smaller population spread across a country the size of Japan results in high infrastructure costs per person.

"We cannot afford the mass transit systems - train, wide motorways - needed to allow efficient sprawl of people."

He says the end result points to one conclusion as far as Auckland development goes - "it goes vertical."

In what could also be a hint to investors looking for potential hot spots he says developers with an eye for the future, "will want to secure land not too distant from the city centre, not too far from an existing transport node, and perhaps in an area which the council may have indicated will be favoured early on for compacting."

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