The new coalition government comprising National, Act and New Zealand First – formed at the end of 2023 – has brought with it significant changes for property investors and an increase in optimism throughout the sector is already becoming apparent as a sliding housing market shows signs of stabilisation and prices are beginning to rise again, albeit modestly.
So, what’s changed?
Put simply, the bright line property rule, which had increased to encompassing 10 years, meaning that owners who sold their properties sooner than that were required to pay tax, has gone back to two years, which is a significant reduction.
In addition, investors who had been denied the right to deduct the cost of interest paid on their mortgages – against their rental incomes – following law changes by the then Labour government in 2021 – can once again claim these deductions in the form of 60% in 2024, rising to 80% for the upcoming financial year from April 1 then moving back up to 100% in 2025/26.
What about interest rates?
While interest rates remain high by recent historic precedents, there has been a noticeable relaxing by banks in the past few months and as inflation heads downwards, those rates appear to be slowly heading down too, causing sentiment and enthusiasm amongst property investors to slowly turn.
Caution is still important, with analyst CoreLogic NZ’s Chief Property Economist Kelvin Davidson recently commenting:
“For new entrants to the housing market, there are still significant challenges in terms of saving the deposit and satisfying loan serviceability criteria. Investors are also facing challenges from high mortgage rates too, while even existing owner-occupiers looking to move up the ladder still need to assess their finances closely.
“While the official cash rate remains on hold for now, the risk of a further rise in the short term hasn’t dissipated altogether, and the likelihood of official cash rate cuts aren’t on the table for the foreseeable future either. This will mean shorter-term fixed mortgage rates, such as the one and two-year loans, could remain elevated for a while yet.”
So, with this renewed, if subdued, enthusiasm, landlords and potential landlords are once again eyeing up investment properties, and one of the most active areas in New Zealand right now is Christchurch.
Why Christchurch?
The garden city and its environs have much to recommend them. Now officially accepted as New Zealand’s second largest city with a population of 384,700, Christchurch has ultimate benefitted in many ways from the extensive rebuild which was forced upon it by the tragic and destructive earthquakes of 2010 and 2011.
Tired properties which perished in the disaster have been replaced by well-built modern dwellings and the region’s industrial, commercial and retail powerhouses have continued to grow and expand, with increased immigration adding to demand for quality housing. The suburban landscape is already large and sprawling and with the city’s population predicted to continue growing steadily there is still plenty of land available for development.
Although a national downturn in consents for newbuilds is also affecting Canterbury, existing properties are still attracting steady interest from property investors.
With this growing demand for quality housing coupled with the various benefits brought about by the new government, the scene looks set for property investment success – especially for cashed up investors or even newcomers who are prepared to take a long-term approach.
Is this the right time to invest in Christchurch?
CoreLogic figures for February 2024 put the average price of a property in Christchurch at $758,452, which is around 4.5% below peak prices, which were reached in February 2022 – just after the end of Covid pandemic lockdowns.
With the stratospheric highs of the 2022 market now back down to an affordable level and rising modestly following the bottoming out of the market in June 2023, investors who have the means to do so may be sensible to start looking now – especially if their strategy is centred around capital gains.
According to CoreLogic’s latest release: ‘Of the 82 suburbs analysed across Christchurch, only seven have seen the median property value drop in the past year, while 17 have seen gains of at least 3%. There has been more widespread growth recorded since December, with Aranui the strongest at 2.8%.
Fendalton is the priciest suburb ($1.66m) across Christchurch, while Phillipstown is the cheapest with a median value of $447,400.’
Median weekly rents are around $455 for a two-bedroom dwelling and $550 for a three or four-bedroom home.
Where to buy property in Christchurch?
Suburbs such as Papanui, Shirley and Riccarton are popular with people looking for rentals with easy access to their workplaces. Many of these tenants have been unable to get onto the housing ladder themselves but still want somewhere pleasant to live. It’s worth noting that unemployment in Christchurch remains low, despite recent expectations to the contrary.
The newly revitalised central city is also very desirable, with its vibrant restaurant bar and café culture, shops, markets and civic buildings. Townhouses and apartments in this area are still well-priced and potentially a good prospect for a small-scale investor.
If you’re interested in scoping out Christchurch in terms of property investment, do get in touch with our Money Empire experts. Many commentators believe that properties in the city have been undervalued in comparison with the rest of New Zealand so this may be the ideal time to start looking.
