Tweet
Investors lose faith in rental property
By JAMES WEIR - The Dominion Post | Monday, 21 July 2008
Rents are rising,
but confidence in the rental market is falling from its glory days as house prices slide, according to the ASB investor confidence survey.
Rental property has given the best returns of any investment class in the past five years, according to the survey.
But in the three months to June, confidence in rental property providing the best returns has dropped three percentage points to 16 per cent of those surveyed.
That brings rental property back to level-pegging with bank term deposits,
Confidence in the rental market is now at its lowest point for four years.
"The weak housing market has seen prices come under pressure, with equity in investment property retreating along with prices," said ASB head of investment services Jonathan Beale. "This may be challenging some investors' perceptions that the strong capital gains of recent years will continue into the future."
Real Estate Institute figures show the national median house price is down about 3.5 per cent to $340,000 since November last year.
Before that dip, prices had doubled in the previous five years.
The market was given a boost when two-year mortgage rates went close to 6per cent in 2003, but now they are about 9.2 per cent.
The Reserve Bank and some market economists expect house prices to drop about 8 per cent this year as the market weakens, and as much as 13 per cent over 18 months.
On the positive side for landlords, official inflation figures out this week showed housing rents rose 3.1 per cent in the past year, but even that was outpaced by overall inflation of 4 per cent for the June year.
Latest Building and Housing figures for the first half of the year show the average rent for a one-bedroom central Wellington apartment was $294 a week.
Rents are much cheaper on the city fringe in Mt Cook, at an average of $218.
Nationally, three bedrooms were renting for an average of $324 a week, and two-bedroom flats at $252.
Meanwhile, ASB says confidence in term deposits has remained stable at 16 per cent and confidence in bank saving deposits is not far behind at 15 per cent.
Confidence that shares would produce the best return dropped from 9 per cent to 5 per cent in the March quarter after another period of market volatility, but rose back up to 8 per cent in the June quarter.
By JAMES WEIR - The Dominion Post | Monday, 21 July 2008
Rents are rising,
but confidence in the rental market is falling from its glory days as house prices slide, according to the ASB investor confidence survey.
Rental property has given the best returns of any investment class in the past five years, according to the survey.
But in the three months to June, confidence in rental property providing the best returns has dropped three percentage points to 16 per cent of those surveyed.
That brings rental property back to level-pegging with bank term deposits,
Confidence in the rental market is now at its lowest point for four years.
"The weak housing market has seen prices come under pressure, with equity in investment property retreating along with prices," said ASB head of investment services Jonathan Beale. "This may be challenging some investors' perceptions that the strong capital gains of recent years will continue into the future."
Real Estate Institute figures show the national median house price is down about 3.5 per cent to $340,000 since November last year.
Before that dip, prices had doubled in the previous five years.
The market was given a boost when two-year mortgage rates went close to 6per cent in 2003, but now they are about 9.2 per cent.
The Reserve Bank and some market economists expect house prices to drop about 8 per cent this year as the market weakens, and as much as 13 per cent over 18 months.
On the positive side for landlords, official inflation figures out this week showed housing rents rose 3.1 per cent in the past year, but even that was outpaced by overall inflation of 4 per cent for the June year.
Latest Building and Housing figures for the first half of the year show the average rent for a one-bedroom central Wellington apartment was $294 a week.
Rents are much cheaper on the city fringe in Mt Cook, at an average of $218.
Nationally, three bedrooms were renting for an average of $324 a week, and two-bedroom flats at $252.
Meanwhile, ASB says confidence in term deposits has remained stable at 16 per cent and confidence in bank saving deposits is not far behind at 15 per cent.
Confidence that shares would produce the best return dropped from 9 per cent to 5 per cent in the March quarter after another period of market volatility, but rose back up to 8 per cent in the June quarter.
Comment