It’s been an interesting year. Healthy homes regulations have now become a reality; the Government passed the Residential Tenancy Act Amendment Bill with unnecessary urgency, interest rates dropped to record lows and in the middle of all that was a global pandemic.
Quickly touching on healthy homes and RTA amendments:
Firstly, with regards to the RTA Amendments Bill, the main part that upset many landlords of student flats in Dunedin was the clause allowing tenants the choice to have their lease automatically roll over to periodic at the end of the fixed term. This is still a worry for many as they face the possibility of losing income if tenants decide to give notice at the end of first semester or in November after exams. If you read the Act there’s a very simple solution to this problem and we will be making an amendment to our tenancy agreements from the 11th of Feb when the Bill comes into effect.
When it comes to the Healthy Homes regulations, the overall idea has some merit but it’s been poorly thought out and the timing is terrible. Studies in the US have shown that these types of regulations only drive the cost of living up – Places like San Diego and New York City are great examples of this. We’re effectively gentrifying rental properties which will make private rentals unaffordable to many and only increase the already large queue for state housing. The National housing shortage problem needed to be solved prior to implementing these changes.
Case and point – a couple weeks ago I took a look through some units. They are currently at a very affordable rent but don’t meet the healthy homes standards. Both the tenants and landlords are quite happy as is but now that the landlords are facing a very large bill to bring them up to standard they would like to recoup that cost and the rent is likely to increase by at least $100 a week per unit. The current tenants won’t be able to afford that, it’s unlikely that they will find anything in the same price range which means they will be forced to join the line for Government housing.
On the subject of housing shortages, recently the media bought to everyone’s attention that the University Halls of Residence don’t have enough rooms to cope with demand. They are planning on building a new hall that will net an extra 325 beds but in the meantime there isn’t enough development going on the in campus area to cope with demand. The harsh truth is that there are going to be Otago University and Polytech students with nowhere to live next year. I’ve received calls from numerous parents in the last few weeks who are legitimately concerned that there child won’t have a flat next year. The construction of this hall will only put more pressure on housing in the campus area. 325 more beds may not seem like a lot but if around 75% of those students carry on with their studies then that’s an extra 50 five-bedroom flats that will need to be built to handle the increase in numbers.
I believe that a major reason for this shortage is that families are now paying as much rent, if not more than groups for quality rental properties. In the past, landlords in surrounding suburbs rented to groups because they would pay more but that isn’t the case anymore. Those houses are now rented to families and the supply of housing for students has decreased.
Normally the majority of letting is done during the second semester but there is likely to be some media coverage around the lack of student housing in Dunedin and when that happens that will create a panic, bringing the letting window forward. I expect that there will be a lot of enquiry for flats all over campus from all year groups in April and May next year as they rush to get a flat signed to avoid missing out completely. The number of tenants wanting to re-new their agreements for another year will likely increase also – If they’ve secured a flat that they like, why risk moving.
Many landlords kept their 2021 rents at the same level as 2020 due to uncertainty surrounding Covid19 but this obvious lack of supply is likely to drive rents up for 2022.
The university investment market has also changed significantly over the last 12 months. 7% returns are now a dream with rentals in the campus/ central city area generally selling between 5% and 6% gross depending on the quality. Low interest rates, high demand and lack of supply are the key contributors to this. People want their money out of the bank and they know that the Otago University investment market is a safe and often very profitable option. The problem is that there aren’t many landlords willing to sell because they can’t find anywhere better to put that money and they don’t want cash sitting in the bank doing nothing either. – Matt Cutler
The median sale price for October 2020 sits at $560,000 a rise of $55,000 on last year’s figure, showing our market remains very positive.
However, the number of sales for October has dropped from 199 last year to 183.
While there is an increase in homes on the market with 286 currently available, we still believe there is a genuine lack of supply, which means that more buyers are offering/competing for the same property.
The median days to sell stays the same at 23 days on the market. A lot of buyers are getting themselves in an unconditional position before looking to purchase, possibly why the median days to sell remains relatively low. Our open homes are still seeing good numbers viewing especially if a home sits in the high demand price range, particularly those between $450,000 and $550,000.
Christmas is fast approaching but we still believe there is plenty of upside to coming into the market. If you would like an updated appraisal on your home give your preferred Cutlers sales consultant a call we are ready to help. You may be surprised at how much your home could return you at present. – Donald Muldrew