CPII Survey December 2018
Each month Crockers Property in partnership with independent market research firm Ipsos, survey Auckland property investors for their comments and thoughts on the Auckland property market. The results of the latest CPII survey (Crockers Property Investment Index) are as follows:
- An estimation of the rental return (yearly rental income divided by house price) indicates that returns across Auckland have bounced back in 2018 after six years of falling returns resulting from sales prices increasing faster than rents.
- The Auckland Rental Property Investment Index has softened after an increase in those who plan to reduce the size of their rental property portfolio, this signifies the highest percentage of investors since June 17 who have indicated they would like to divest - helping reduce house prices and improve rental returns in the process.
- The Auckland Rental Property Performance Index has increased after it softened in the final quarter of last year. This is a result of a slight increase in those who believe their rental property performance will get better over the next 12 months and a strong decrease in those who believe their rental property performance will remain the same.
- ‘Other residential’ property remains the most popular planned rental property investment type, although this month there has been a spike in those interested in ‘commercial’ property.
2018 Review: Prices Down and Rentals Up
In 2018 the average selling price in New Zealand showed an increase by 30% ($127k) since 2014. These increases were most driven by shifts in Wellington and Dunedin, as Auckland and Christchurch average sales prices essentially unchanged on 2017.
The stagnation in house prices in Auckland was contrasted by rental prices, which increased in Auckland by 20% ($83) for 2-bedroom and 17% ($96) for 3-bedroom dwellings since 2014 (both up 3% on 2017).
As a result of the climbing rents and stagnant sales prices, estimated rental returns (yearly rental income divided by house price) indicate that returns across Auckland and Christchurch have bounced back after several years of falling returns resulting from sales prices increasing faster than rents. In contrast, Wellington and Dunedin rental returns have continued to fall.
This makes investment rentals more attractive, as the proportion of rentals’ mortgages that can now be paid through tenants’ rents has increased.
Crockers Property Investment Index
Auckland Rental Property Performance Index
With Auckland house prices no longer appreciating at the same fast rate that we have become used to, Auckland property investors have become bearish, with fewer planning further portfolio expansion in the next 12 months. As a result, the Auckland Rental Property Investment Index has dropped this month after witnessing a steady increase in Aug-Nov ‘18.
However, as rents have not decreased, rental returns are rising and so the Auckland Rental Property Performance Index has picked up after witnessing a drop in Sep-Nov ’18 - more investors are expecting their rental property performance over the next 12 months to get better.