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Reproduced are some of Prof Hargreaves Power Point presentation at the Expo during the weekend. Only the text slides have been reproduced, no graphs are included.
People=demand pressure
��Internal migration
��External migration
��Net migration
��Household formation
��Marriage and birth rates
��Predicting the future is difficult but do have some tools –
��What is going to happen in the future is heavily influenced by demographic trends that are already in place-
��Real estate is a very durable asset. This means the built environment will continue to be dominated by the existing housing stock.
��To a large extent the Auckland Regional Council have already signalled the future growth strategy
The population growth rate will slow down over the next 100 year
•The population is expected to peak at 4.81 million in 2046.
•The population will drop to 4.43 million by 2101.
•New Zealand's population will continue to age.
Recap on Demographics
��Net migration strongly correlated with house prices
��Population drift to Auckland
��Things are happening later (marriage, children)
��Smaller families-population peaks in 2046
��Young people are in the rental market for longer
Residential Rental Investment opportunities set to increase.
��Home ownership rate dropping, more people renting
��Occupancy rate per house dropping
��Home affordability is the big issue, particularly in Auckland
��Not long before every second home in Auckland City will be a rental. (In 2001, 44% rented).
Saving for a house
��Kiwis have a mediocre savings record
��Renters save very little
��Deposit barrier
��Debt servicing barrier
Auckland affordability can only get worse!
��Regional Council growth strategy will push up land prices
��New building regulations set to push up construction costs
��Historically house prices have gone up faster than wages and salaries
The supply side
��Mostly rental properties are conversions of older owner occupier houses
��Typically these are situated in the suburbs
��New purpose built rental housing will be mostly in medium density areas
��Overseas trends for Real Estate Investment Trusts (REITs) as players in the rental apartment market
Investment Returns
��Investors compete with owner occupiers for houses
��Kiwis understand property and like the hands on aspect
��Investors are influenced by the returns from other investment (Shares, Bonds etc)
��Recently residential investment returns have been very good but this is mostly capital gain
��Residential yields are low
The future market risks
��Government intervention
a.State housing (more subsidised units)
b.Kiwi Bank (subsidised mortgages)
c.Accommodation Supplement (up or down?)
d.Tax treatment of investment property may change for the worse
Other market risks
��Over reliance on capital gain
��Remember “Cash Flow is King”
��Ultimately value is the present worth of the future cash flows
��Affordability dictates rents
��Over optimism and overbuilding
So where does this leave the investor?
��+The demograhic trends look good in the medium term
��+Increasing numbers of people shut out of the ownership market due to affordability considerations
��Rents will tend to stay more in line with wages and salaries than house prices
��-But capital gain will be harder to achieve over the next 5 years
��-But governments tend to meddle in the market
��-Is the accommodation supplement guaranteed?
��-Property management is not for every one
Regards
Reproduced are some of Prof Hargreaves Power Point presentation at the Expo during the weekend. Only the text slides have been reproduced, no graphs are included.
People=demand pressure
��Internal migration
��External migration
��Net migration
��Household formation
��Marriage and birth rates
��Predicting the future is difficult but do have some tools –
��What is going to happen in the future is heavily influenced by demographic trends that are already in place-
��Real estate is a very durable asset. This means the built environment will continue to be dominated by the existing housing stock.
��To a large extent the Auckland Regional Council have already signalled the future growth strategy
The population growth rate will slow down over the next 100 year
•The population is expected to peak at 4.81 million in 2046.
•The population will drop to 4.43 million by 2101.
•New Zealand's population will continue to age.
Recap on Demographics
��Net migration strongly correlated with house prices
��Population drift to Auckland
��Things are happening later (marriage, children)
��Smaller families-population peaks in 2046
��Young people are in the rental market for longer
Residential Rental Investment opportunities set to increase.
��Home ownership rate dropping, more people renting
��Occupancy rate per house dropping
��Home affordability is the big issue, particularly in Auckland
��Not long before every second home in Auckland City will be a rental. (In 2001, 44% rented).
Saving for a house
��Kiwis have a mediocre savings record
��Renters save very little
��Deposit barrier
��Debt servicing barrier
Auckland affordability can only get worse!
��Regional Council growth strategy will push up land prices
��New building regulations set to push up construction costs
��Historically house prices have gone up faster than wages and salaries
The supply side
��Mostly rental properties are conversions of older owner occupier houses
��Typically these are situated in the suburbs
��New purpose built rental housing will be mostly in medium density areas
��Overseas trends for Real Estate Investment Trusts (REITs) as players in the rental apartment market
Investment Returns
��Investors compete with owner occupiers for houses
��Kiwis understand property and like the hands on aspect
��Investors are influenced by the returns from other investment (Shares, Bonds etc)
��Recently residential investment returns have been very good but this is mostly capital gain
��Residential yields are low
The future market risks
��Government intervention
a.State housing (more subsidised units)
b.Kiwi Bank (subsidised mortgages)
c.Accommodation Supplement (up or down?)
d.Tax treatment of investment property may change for the worse
Other market risks
��Over reliance on capital gain
��Remember “Cash Flow is King”
��Ultimately value is the present worth of the future cash flows
��Affordability dictates rents
��Over optimism and overbuilding
So where does this leave the investor?
��+The demograhic trends look good in the medium term
��+Increasing numbers of people shut out of the ownership market due to affordability considerations
��Rents will tend to stay more in line with wages and salaries than house prices
��-But capital gain will be harder to achieve over the next 5 years
��-But governments tend to meddle in the market
��-Is the accommodation supplement guaranteed?
��-Property management is not for every one
Regards