Published on: 2016-01-21

Residential Investment Outlook

Residential Investment Outlook

General manager Lodge Rentals David Kneebone reflects on 2015 and casts his eyes forward to 2016.

 This time last year I presented a speech to the Auckland Property Investors Association (APIA), extolling the virtues of investing in the Hamilton residential property market.

 I touched on three key issues.

 First, I reflected on Hamilton’s growing demographic of young and well educated people within its population, a key cohort which was creating new employment opportunities across the city.

 Second, I highlighted that the median house price in the city traditionally tracks the New Zealand median price, perhaps reflecting a strong correlation between the two medians. During periods in which the Hamilton median lagged behind the national median (as it was doing at the time), what typically followed was a period of rapid appreciation in the Hamilton median price, as the local market underwent a ‘catch-up’ phase.

In essence, Hamilton’s median price ‘bounces back’ to meet the New Zealand median price.

 Third, I noted the developing interest of Aucklanders in Hamilton’s investment market, driven largely by higher yields and better perceived value.

 In the eight months since March 2015, these three factors seemingly combined forces to fulfil the expectation of a rapid increase in Hamilton’s house prices. Across the city we have seen significant increases in demand, and indeed some Hamilton properties have increased in value by as much as 20%.

 The sales team has experienced strong activity since the first quarter of the year, with an ever-increasing proportion of sales to Auckland-based investors.

 Since that time, I have delivered similar presentations to Hamilton-based investors (in association with the ANZ Bank), and it’s pleasing to report I’ve welcomed plenty of new local owner-clients too. It’s been a real pleasure to see our existing owners’ confidence increase, and this is reflected them adding to their Hamilton portfolios. So the upshot is great momentum; and this is great reward for all the people in the community who show continued faith and loyalty in our local economy.

 In this low-interest rate environment, I expect that the strong price growth will continue into 2016, supported by expectations of continued population growth.