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  • Investors lose faith in rental property

    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.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    No sh*t sherlock!

    Why do the media always state the obvious?

    Comment


    • #3
      Meanwhile, other reports are telling us that the investors are jumping back in both barrells blazing, picking up the sales.

      Comment


      • #4
        Yeah I guess the people who have bought their first property or two in the last few years, without their hearts really being in it, perhaps just because everyone else was doing it, might have a few hassles and decide to chuck it in.

        As you guys here will know it takes a lot of perserverance. And if you're not really interested and the tenants are causing problems, then it would be easy just to flick off the property and do more fun things.

        David
        Squadly dinky do!

        Comment


        • #5
          Originally posted by Davo36 View Post
          Yeah I guess the people who have bought their first property or two in the last few years, without their hearts really being in it, perhaps just because everyone else was doing it, might have a few hassles and decide to chuck it in.

          David
          In the long run, getting out might be the best decision for them.

          Comment


          • #6
            I don't agree tanmedia.
            As long as they can afford to keep the property they should.
            If they can not, then absolutely get out before they are forced out.

            The issue is that if they bail now and loose say 30k or 40k (who knows it could even be more) then how does the average kiwi make that back?

            If a mid 50's investor lost that sort of money and they were on average income then it would be nearly impossible for them to make up that loss before retirement. In turn that means another retiree who still owes money to the bank and joins the que for some sort of retirement hand out.

            Sure no one knows when the market will turn back to a positive but when it does the paper loss is generally gobbled up pretty quickly.

            anyway thats my 2 cents worth.

            cheers

            Terry

            Comment


            • #7
              Originally posted by tanmedia View Post
              In the long run, getting out might be the best decision for them.
              Sorry about the above post. i note you did say getting out might be the best decision. your right it might be. its past my bedtime obviously.

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