As we approach winter the housing rental accommodation situation has eased a little with available rental properties in the private sector increasing by 200 properties in Christchurch City from the tight supply situation in March 2012.

Ever since September 2010 there has been an ebb and flow to the supply and demand for rental accommodation. 

One point pleasing to note is Minster Brownlee’s allocation of funding to repair Housing NZ and CCC housing units.  Many of these properties will take little work to become habitable again.

The investment of $71 million to return nearly 1000 homes back into the rental pool is excellent for the tax payer, more cost effective than temporary villages.  The return of these homes will assist in meeting social housing needs. 

What we would like to see is a gradual increase in rental returns not a sharp artificial spike in rents that are unsustainable.  We appreciate that the cost of property ownership is increasing through rates and insurance but rent increases are more than covering this. 

The rebuild of Christchurch is only at a token stage with estimates on time frames continually being pushed out further into the future.   Again with slightly more rental properties available it is the med-range of 3-4 bedroom homes in the least affected areas that are in greatest demand.  Some high end and poorer quality housing still take time to tenant.

Tony McPherson

Housing New Zealand and Christchurch City Council have between them approximately 1000 properties vacant, many only requiring minor repairs to make them habitable.  The media have regularly highlighted often sensationally the plight of individual’s problems in obtaining accommodation.  The availability of homes for the above agencies would appear in the short term a solution to the social housing issue. 

This full use of existing housing before the construction of further temporary housing is important both in terms of cost to the tax payer and potential social issues around ongoing Temporary Housing Villages. 

Rents have increased, so has the cost of owning property.  The private sector rental housing pool has diminished.  We identify excellent long term investment opportunities in Christchurch.  The work force required for the regions rebuild will seek a significant amount of rental accommodation.  The demand is for property ranging from a medium to high standard.

Insurance companies are also looking for good quality accommodation for relocation of property owner clients during the repair to their client’s homes.

The rebuild is a project of many years which will offer the long term prudent investor excellent returns.

Tony McPherson

http://www.stuff.co.nz/business/rebuilding-christchurch/6608376/Accidental-landlords-push-prices-up

http://tvnz.co.nz/national-news/christchurch-rental-crisis-best-left-market-govt-4785067

For those who question why should I invest in residential property in Christchurch in the light of continuing aftershocks and increasing cost of ownership.

Christchurch is now the site of the largest civil engineering project ever to be undertaken in the history of New Zealand by a factor of between 10 and 20 times the size of any previous project.

A high percentage of this project is insurance funded with further significant contribution from Government, Local Authorities and Private Sector.

Effectively Christchurch is recession proofed for many years to come.

The media currently is expressing the frustrations of a number of Cantabrians; this is the result of continuing aftershocks which slows the rebuild time table amplified by insurance issues. 

As with any major event in one’s life there is a psychological cycle in response to these events, and with some immediate broad decisions that were required, there were some winners and losers.

A natural human reaction to some of these situations is despair and frustration and blame.  Towards the later part of 2012 the rebuild will gain momentum with attitudes and spirits lifting as progress becomes tangible.

The aftershocks are following predictions of lessening occurrence and intensity, as some of these aftershocks are very shallow and close to the city their impact is still noticeable. 

The majority of Christchurch’s residential properties on Land Zoned Green in the Grey and Yellow categories, are of light timber frame construction and have performed extremely well in over 10,000 earthquakes with mainly only cosmetic damage occurring.

The demand for residential rental property is giving increasing returns both in property values and rents, taking into account the above factors this should be an on-going trend.

Tony McPherson
Director – McPherson Property Management

The future of the Central City both in terms of rebuild timeframe and its ultimate significance as Hub of the City will be determined by organisations and people’s confidence.

A confidence to work, play, invest, insure and for some to live, in a new Central City.

The majority of infrastructure is now entrenched in the suburbs. It is of concern Government Departments are entering into long term leases in areas outside the Central City. The initial residential rebuilds are around the satellite towns of Rolleston, Rangiora, Lincoln, Pegasus Town, etc., plus the outer City subdivision in the North and West will drift activity from the Central City.

While appreciating that activity must continue, this commercial and residential development will dis-encourage de-population but will reinforce a City of Satellites and potentially compromise a significant Central City.

The key to robust Central City rebuild and growth is to create an environment where people are attracted to safe, engaging range and choice of activities plus services that meet the need of the whole cross-section of the greater Christchurch population.

We applaud the CERA approach, and encourage people to have their say through this survey.

The majority of the commercial rebuild will be undertaken by the private sector. Many of the building owners are property investors not developers, support and encouragement to reinvest in the new Central City is important.

There is already anecdotal evidence of capital flight.

Significant areas of commercial property demolished post-earthquakes were old unreinforced masonry 2 or 3 level buildings.

Many of these types of buildings were not effectively utilised pre-quakes, often only the ground floor was retail, with storage or vacant in the above levels.With these buildings there were issues around change of use, the economics of bringing the property up to code. These obsolescent buildings did provide cost effective space to some of our more colourful retailers adding character to the City. To provide facilities for these types of traders in the future a market style environment could be considered around the retail and entertainment precincts. Perhaps a combination of our existing markets small scale retailers.

We look around some of the great Cities of the World and see how market places enhance a Central City, Barcelona & Budapest as a couple of examples.

The establishment of the Cashel Street container retail area has given Cantabrians a taste of a different style of shopping, with very positive feedback and initial results.

Traditional retail in Christchurch has been Mall or strip shopping.

The new Central City in the short – medium term will require a lot less land for Commercial use.

The encouragement of medium density residential development within and close to the Central City would be advantageous. More people in the City Centre sooner will result in a wider range of goods and services developing. Thought should be given to new sporting and recreational facilities as well, which should be integrated into the mix.

The Central City has an opportunity to establish as a vibrant environment but for this to occur it must be accessible and attractive for people to work in, to shop in, to be entertained in, and live in.

Tony McPherson

As we have seen following prior events life continues and the resiliance of Cantabrians is strong. 

The events are following a predicted pattern that will lesson in frequency and intensity as time goes on.

Availability of quality residential rental properties remains short in supply.  Rents have steadily increased for these types of homes in the least affected areas.  We see a continuing strong demand for these properties.

Demand, especially for family homes in the least earthquake affected areas is strong and rents are increasing for these properties.

Population trends are difficult to gauge with some of the headlines in the media at times misleading, with % population drops reported in the city not taking into account the redistribution of people over greater Christchurch.

The difficulty of obtaining new insurance continues to keep the rebuild phase at a low level, but the enormous de – construction continues, with the high rise buildings a focus.

The strong buyer enquiry from owners of Red Zone Residential properties was the main factor in this increased activity along with first home buyers and people transferring to Christchurch. 

Lack of properties on the market was an inhibiting factor for some buyers but September saw an increase in properties available for sale. 

Sales volumes within the City are still clearly divided between the least affected areas and the Central City, Eastern and Hill suburbs.

 These figures also show a gradual increase in sales volumes in the most affected areas. 

The September 2011 median price of $348,000 has eased back in Christchurch City from $356,250 in August 2011, but is up over 5% for the year. 

Certainly there is a firming of prices for property in the North and West of Christchurch plus Selwyn and Waimakariri Districts. 

Comparison of Sales Numbers in Canterbury

 Statistics for September 2010 were not used for comparison for obvious reasons.

Activity in the least affected areas is continuing to be strong and it is pleasing to note that an increasing number of properties are coming to the market.  This increased number of properties available for sale is welcomed by potential buyers after the extremely low level of choice in the period from late July through to September. 

Some of the accidental landlords are choosing to sell.  These are property owners who rented their homes rather than sell after the residential property market correction of 2008.

There is anecdotal evidence of prices firming in the least affected areas but this from the lows of 2010. 

Insurance is continuing to be an issue especially with new build dwellings and tenants generally are unable to obtain contents cover.

Residential Rental

Demand is very strong in the least quake affected areas with vacancies at extremely low levels. 

The student properties have in large been re let for 2012, with the better quality properties being leased quickly.  This is a pleasing result in light of the projected drop in the Canterbury University roll of 1500 students for the 2012 year.

 The Christchurch housing market sales volumes continue to recover to pre-earthquake numbers.

 August 2011 recorded 410 residential sales compared with 310 in July 2011.

 The activity in the market place is primarily for first home buyers and property owners in the Red Zone.

 A shortage of family homes in the least affected areas is creating strong competition for those available properties in these locations.

 The difficulty in obtaining insurance for new housing is slowing up this option for buyers, with only 1 or 2 of the large home builders being able to arrange cover.

 Indications are that insurance should free up the longer we are free of significant aftershocks.

 Those who may be considering selling certainly now is a good opportunity, as house building increases buyers will have greater choices.

Rental Market

Demand for quality rental properties in the least affected areas is strong with a very limited selection available.   Rents are firming in these areas, which is the Northern and Western suburbs, plus Selwyn and Waimakairi Districts.

It is pleasing to note good demand for our student accommodation for the 2012 year in light of the substantially lower projected roll numbers.  As always the better properties are leased first.

The residential property market demand has ebbed and flowed through the past 12 months, with a period in mid May 2011 where vacancies were at levels above pre-quake.

We now note that current availability of property is at a historical low level using “Trade Me Rentals” listings as a barometer.