1. Low interest rates
Interest rates are at record lows, and chances are they will stay that way for some time. This makes it easier for investors to fund their borrowing, and helps to produce higher rental yields.
2. The market is stable
Over the last 12 months or so, we have seen price decreases in some suburbs of Auckland, but the market now appears to be stable/flat. There are still discounted deals available, particularly from vendors who are under financial stress. Due to Auckland’s growing population, high employment, higher wages and supply-demand imbalance, I don’t see any major indicator causing further price reductions (unless we suffer a left-field global economic event).
3. Rents are increasing
Increasing rents means improved cash flow for Auckland investors, so buy-to-hold yields are starting to look better.
Due to a significant shortage of rental accommodation in Auckland, rental properties are in very high demand. This means you are able to get good rent and have no shortage of good tenants.
To illustrate, I recently had to give tenants in one of my properties 90 days’ notice. I believed this would give them plenty of time to find alternative accommodation. On the day they were due to move out, I went to the property to say goodbye. Everything was packed up in the car, and I asked where they were moving to. Their answer? “We don’t know. We have been looking for somewhere for the last three months. Every open home we go to, we see the same families who are in the same situation as us.”
This was very hard for me to hear, and illustrates the desperate need Auckland has for good rental properties.
All of the above leads to the potential for positive cash flow and great investing in Auckland. Clearly, you still need to choose the right sort of property in the right areas, and adopt the best strategy. For example, houses of multiple occupancy (HMOs) and rent by the room can be excellent ways to increase the yield properties produce.