Your country needs you!

A new study has good news for property Investors. The Centre for Housing Research released a study this week concluding that demand for rental properties is set to substantially increase and significant non-government resources will be required to meet the increase in demand. This means New Zealand needs you to supply more rental properties.

The Research Centre believes that projected growth in demand will require significant capital injection from a range of sources including government, local government, community trusts, private and institutional investors.

Putting a dollar amount to the rental housing requirement, they assumed that at an average cost of $250,000 for a rental unit, then an additional $50 billion investment in rental property will be required between 2006 and 2016.

Assuming government public housing stock continues to increase at 1,000 per annum, they project an annual shortfall of 13,000 dwellings that will need to be provided by non-government sector sources at a value of $3.25 billion. While the study mentions Community Trusts and other non-profit groups, these organisations are primarily funded through Government so are essentially part of the taxpayer funded supply of housing.

While the projected 13,000 rental properties and $3.25 billion per year capital requirements are similar to recent levels of investment, the study recognises that investors may not be willing to inject similar amounts of capital if the residential rental investment market softens.

There is good and bad news for New Zealand’s tenant population, however. The good news is that the supply of rental housing is likely to increase and therefore there will be homes for them to occupy. The bad news is that rental prices will need to increase in order for this to occur.

There are signals that rental prices will in fact increase over the next few years while house prices will remain either flat or rising slightly. Demand for rental houses is likely to increase as people realise the large difference between the cost of home ownership and the cost of renting. Renting is by far cheaper on a weekly basis than home ownership and people are starting to put off home ownership plans in order to save larger deposits. By delaying their buying decision, many will justify paying more for better rental accommodation before they eventually buy a place of their own. We live in an age where many are not prepared to accept short-term pain for long-term gain.

While many would like to answer the call and help the nation’s rental property problem, they are coming up against their own problems. The largest is how to fund any more than one or two rental properties before the bank starts getting nervous. Some have good equity, some have good cashflow but few have both. In our busy lives there are also time constraints and questions on where to invest.

If you would like help on how to answer these questions and put the answers into your own personal Property Business Plan then contact me to arrange an appointment. An initial Right Start package involves a situation analysis, one and a half hour personal meeting, use of custom designed business planning calculators, Borrowing Capacity spreadsheet to keep you up-to-date, strategy printout and draft business plan. All this for just $350.

Remember. Your country needs more rental properties. Ask not what your country can do for you, but plan what you can do for your country.