Auckland property trends for 2020
Hope that you’ve all had a relaxing and restorative holiday break with family and friends. The new year is all about taking a moment and re-evaluating, and as we also enter a new decade, this seems to be even more pronounced. Here are the three themes we’ve picked up on when speaking with our owners recently.
Lifestyle change; consider renting
As we all get back to the reality of work after the holiday break, we’re having lots of conversations with owners who want to move their family to the regions. Perhaps relishing the slower pace of the holiday period, or having enjoyed some time out of Auckland, it’s not uncommon now to be looking at whether they sell up and buy in Hawkes Bay, as an example.
You often don’t need to make this decision quickly. Of course, act swiftly if the inspiration has struck now, but selling up need not be the first solution. Consider trying before you buy; renting your own home out while you rent in the area that you want to relocate to. Renting need not be a life-long decision, and this enables you to get a feel for the move, before making a commitment that may be difficult to reverse.
You may think that you can’t possibly rent out your family home, or that tenants will damage it – or only you can present it in such a way as to get top dollar if you did want to sell later on down the track – so it’s better to sell sooner.
It may be that the rental income on the property you own doesn’t cover 100% of your mortgage quite yet, especially if you have recently purchased. However, with some savvy shopping around, it may be possible to almost get parity. With the way that banks are lending, you may also find yourself able to buy something down the line without having to sell what you currently own. There’s a general – and well-founded – feeling that once you sell an Auckland property, it might not be possible to go back, so it’s definitely worth considering all of the options.
Time for consolidating
The other trend we’re seeing is the goal of paying down more of the mortgage while the cost of money is so cheap. We’re seeing lots of owners refinancing, and many are shocked at how much they have left over when the lock-in new, cheaper rates. This is allowing the space for them to travel, pay down more on the homes they live in, or pour more back into their rentals.
We’re not necessarily saying that you should rush out and change mortgage providers, but while you’re pausing and re-evaluating right now, take a moment to look around and see what could be available to you – with your, or alternative, providers.
The prime focus we’re seeing now with many of our Auckland property owners is on increasing their equity. This is being made possible by rising rents and cost control, and it’s encouraging to see many squirreling away the excess to get ahead – making progress while money is cheap. There’s a real commitment among many of our investment property owners to reduce their LVR (loan to value ratio) putting themselves in a stronger position ultimately to be ready for the next wave of opportunity.
For our General Manager Natalie Wendell, that’s high on her agenda too. “We’ve just moved our loans to secure amazing rates, reducing what we were paying by an entire percent. Coupled with strong Auckland rents, there is a real opportunity for us to reduce risk or gear up and we are watching the Auckland property market closely.”
“There are times to grow and there are times to consolidate in preparation to grow again, and that’s what we’re seeing now. This sort of holding pattern in the market is a return to business as usual now that much of the hype and anxiousness has died down. Owners are focused on getting their house in order, so to speak. They’re thinking long-term, focusing on smart property maintenance, long term tenancies and cashflow.” Natalie adds.
A move from do-up to new build investment property
The final big shift that we’re seeing as we enter this new decade is a change in what investors are purchasing. Even those who have typically focused on building their portfolios renovation opportunities are starting to diversify into the new build sector.
There is plenty of opportunity with new builds in the Auckland property market. Not only are discounts available from developers that need to lock in sales, but buyers are able to secure a home at today’s prices, while not having to start paying the value of the loan for – sometimes – 18 months, till title and possession. New builds also have the benefits of 10-year warranties on the building work and zero maintenance to start with (which is worth considering as maintenance becomes an increasing liability on older homes, especially with the looming regulation surround Healthy Homes).
More Auckland tenants are crying out for 3 and 4 bedroom homes with more than one bathroom, these types of properties will be in high demand for renting. We have seen this with owners who have invested in Hobsonville Point, Huapai, Whenuapai, Riverhead and over developments in North West Auckland. They enjoy strong rents (up to 5%ROI), quality tenants and long term tenancies, with relatively low levels of maintenance and upkeep.
Overall, it’s our belief that 2020 is a positive time for property and we’re excited to see how the start of this decade further unfolds. If you are looking to make a change in 2020, give us a call. We’re always up for a no-obligation chat and can lend an expert ear.