Queenstown commercial real estate company says income-producing residential property has never been more popular in the resort.
Colliers International – currently marketing two residential investment properties – reveals this sector of the market has experienced capital gains of about 25 per cent over the past 12 months.
Colliers’ local residential investment specialist Sophie James says two major factors underpin this increase.
The first is the area’s economic growth, as reflected in tourism figures, building consents and infrastructure development.
“We’ve got all the hallmarks of growth.”
The other factor is the shortage of rental stock, which has seen rents skyrocket.
Demand is outstripping supply by a big margin, James says.
But there’s also a shortage of other investment options, she adds.
“If people are putting their money in the bank, they’re getting nothing – and that’s going to continue for a while.
“And if someone wants to go and buy a commercial property, there’s not much affordable or available, or at decent yields, so traditional commercial investors are looking at residential property.”
Due to rental growth, James says average gross returns over the past year have risen from about 4.5-5 per cent to more than 6 per cent for some properties.
“The viability of buying a house for investment returns has increased.
“Even though the property value’s gone up significantly, the rents have gone up more.”
James says the residential investment market is also attracting a big increase in enquiries from Aucklanders as their city’s values get out of reach of a lot of investors.
“Our strong economic drivers and the ability to produce consistent rentals with future growth potential are the main factors driving these investors.
“They are less worried about the physical real estate and more focused on the returns or yield the property can generate.”
Due to the attractiveness of this sector, James expects keen interest in the auction next month of two well-located multiple-tenancy Queenstown properties.
The first is a 1970s A-frame in Lomond Crescent, comprising a five-bedroom house over three levels and two one-bedroom basement flats.
Current rental income from the property is $61,880 per annum.
The other is a four- or five-bedroom house – the fifth bedroom can be a second living area – with an attached one-bedroom flat.
A new owner can inherit a one-year lease worth $67,600 or $1300 per week.
“These two opportunities are examples of how residential property that has been specifically built or configured for multiple tenants will continue to show very strong rental growth and consistent occupancy,” James says.
Colliers is auctioning the two properties on December 16.