Christchurch Rental Market November 2019
I sense that the Christchurch rental market is beginning to appear more attractive and enticing for our residential investors than in previous years. I am leaning to this thought for a few reasons that I thought I would share.
Interest rates have fallen again - with major banks now offering lending for as little as 3.45% for a two year fixed mortgage rate. On 13 November Reserve Bank Governor Adrian Orr will make another announcement on the Official Cash Rate. Even though it is at an all-time low, many are predicting another drop, to take it down to 0.75%. Interest rate decreases work in a two-way incentive for potential property investors. The lower mortgage rates are a “pull” factor by making the purchasing of property more feasible through cheaper money; and falling deposit rates are a “push” factor - meaning that having money sitting in the bank earning very little is far less attractive than perhaps the yield on a residential investment property.
Another encouraging sign is the loosening of the loan to value ratio (LVR) restrictions that were applied in at the start of the year. It was the clamping of tough 40% deposit rules on investors in 2016 that led to investor interest in the market falling away - and being a barrier for those who were not already in the market, to get in. Along with low-interest rates and relaxing of the LVRs, information received from the Bond Centre indicates an increase in average rental rates across Christchurch. More decent increases have been seen in the Selwyn and Waimakariri Districts, but this is most likely to be from brand new housing stock boosting those numbers, and improved infrastructure which is making it more desirable for tenants to live. Nevertheless the trend is upwards.
Falling interest rates combined with a stable property market and rents increasing, albeit slowly, offers investors a favourable platform to operate in, and we are seeing investors starting to take advantage of this. Latest lending by borrower type figures from the Reserve Bank shows that the investors have their biggest share of the mortgage money last month for exactly a year. In September, investors borrowed $1.074 billion, which made up 19.5% of the total $5.516 billion advanced by the banks in the month. Now a 19.5% share of the mortgage market is not so much - particularly not when put against the 35% share the investors were taking back in 2016 - but it does represent an increase in borrowing from this sector. In May of this year, the investors borrowed just 17.6% of the total amount advanced. Since then the figures have been moving up - and more noticeably in recent months.
I honestly do feel we will see a boost in activity for the Christchurch rental market and am excited to see where we head. If you have any questions about how to add to your property portfolio or want to know more about the Christchurch rental market, please do give us a call.
0800 22 38 88
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