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A great new start or the same old, same old (or something in between)?

Posted by Bizink on Feb 8, 2011, 5:39:00 AM

Today the new tax changes come in for those of us still left in the rental property market. It’s the start of a new financial year and it doesn’t feel so new anymore. We are all in the throes of electing to change to LTCs, we know about the depreciation changes and we know that our rental property losses won’t have such an effect on our tax this year – but what about this year? What is going to happen to the rental property market, particularly in Auckland where one of the biggest shows in town is going to arrive in a few months time?

According to the papers we would expect the competition for rental properties in Auckland to get worse or better – wherever you are standing. We have all read the stories of the 200 or so turning up for one property and offering over the asking price to get in. But is this somewhat of an urban myth?

The latest figures show the peak rental inflation in Auckland to have reached a ‘massive’ 8-9% p.a. in February in the best responding areas (Sandringham and City Bays) and an average 3% everywhere else in Auckland. (figures from Crockers Market Research).

I think it’s going to be a fair while before investors start to reap the rewards of a shortage of rental properties driving up rents way over the top of mortgage finance costs for the foreseeable future. There may be a bump in August/October when the Rugby World Cup followers start paying over the odds for rental properties but obviously any thought of permanence will end after the last whistle is blown.

Next year may be different, there is a chance that the steady increase in Auckland’s population combined with the flat property market and the very real downturn in new residential building, may lead to a bit more demand in the rental area.

Who really knows – we have a black and blue budget coming – signals have already been given for cutting government expenditure (read jobs) and the effect of Christchurch on all facets of the economy cannot be underestimated. The overall effect of cutting here and spending there will mean some pretty flat lines on a variety of graphs for 2011/2012.

So what do you think? It seems that every man and his canine companion has a valid opinion on where we are going in the economy. It is more about your personal philosophy of the proverbial glass half empty or full than anything else, but the collective power of an optimistic attitude should not be underestimated. If we all envisage that things are going to get better if we just hold steady and keep on doing what we can to improve what we do, time will take care of the economy; we will trust the interest rates not to jump; we will buy property again; rents will rise; Christchurch will be rebuilt as a beautiful new modern centre and everything will be hunky dory…. Right?…

Topics: 2012 financial year, demand, Firm News, investment property, rental property, xero, accounting, Blog, inflation, LTC, property, xero accountant, accountant, changes

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