While there is some optimism in the survey statistics, analysts are urging caution, analysis, review and consideration of the risk-reward factor of housing portfolios, according to the ANZ property investment survey, done in association with the New Zealand Property Investors Federation.
Around Dunedin, the economic downturn appeared to have dampened the rental sales market and it was getting harder to find tenants, Otago Property Investors Association president Grant Roydhouse said when contacted yesterday.
He was unaware of local investors having to quickly exit the market because of the recession, but he highlighted the likelihood that relying on capital gains again for profit was several years away.
Investors had to consider several scenarios at present, including imminent taxation changes, interest-rate hikes and expectations of higher-quality properties, especially in the University of Otago precinct for students, he said.
Anecdotally, Mr Roydhouse understood sales of university rental properties were down by up to 20% at present.
He estimated it could be two to three years before capital gains could again be relied on, but that had still not dissuaded some investors from buying a property for children attending the university, as they "would have some years" to hold the property.
The Otago investors association is affiliated to the New Zealand Property Investors Federation, and its president, Martin Evans, said the national survey showed optimism, with lower interest rates and property prices boosting investor interest.
Many were "looking for bargains", he said in a statement.
However, he cautioned it was important to treat the economic downturn with respect, noting the cost of living was forcing children to move back in with parents and couples to share houses.
"This is leading to a surplus in rental housing, with the number of untenanted properties increasing and rent levels stagnating," Mr Evans said.
The survey finding said a "key reason" for more than one in four investors not planning to buy a property during the next two years was the economic outlook.
"Multiple risk factors are concerning investors, with 21% worried about properties remaining vacant, up from 9% last year, and 17% concerned tenants might default on rent," the survey said.
Most investors surveyed expected rental income growth of 0%-2.5% during the next year, but 6%-10% growth during the next five years.
ANZ general manager of specialist distribution Craig Moffat said investor enthusiasm was surprisingly "optimistic" over the long-term, five-year period ahead and had not been dampened by the global financial crisis, recession and housing downturn.
"Reluctantly, unlike investors, I have to say that I'm not convinced that the housing market is on an upwards trajectory or that we'll ever see a return to the price increases of the 2002-2008 boom," Mr Moffat said in the ANZ survey release.
He urged investors to show caution, research and planning and to consider rental yields and long-term capital gains, to withstand the ups and downs of residential housing investment.
Mr Roydhouse calculated that from April 1 next year, changes to depreciation announced with the Budget in May meant a $200,000 rental property in Dunedin would cost about $28 per week more.
With expectations of bank interest rates climbing from the present 6.5% to 7.5%-8% during the next 18 months, investors would have to scrutinise cash flows.
"If investors are discouraged in the next two years, as they are now, there will be less rental options around, putting more pressure for rents to go up," he said.
Mr Roydhouse, who represents about 600 members across Otago, said that during this year about 50-70 members had resigned.
Many of them had joined directly with a University of Otago code of compliance scheme, as opposed to the 10-year-old Otago association scheme.
He believed that during the next one to two years, there would be pressure to put rents up around Dunedin, including around the university precinct.
"It is getting harder to find sub-standard [university] properties in Dunedin. Renewal of properties cost money so it follows on, that will come at a higher [rental] price," he said.
However, he cautioned that New Zealand culture, unlike overseas, was to not pay a large proportion of weekly income on rent, and upward pressure on rents would be subject to supply and demand.
Past Otago federation president Cliff Seque has several dozen properties in his portfolio and said yesterday he was "replacing old [housing] stock by building new properties in preparation for the economic upturn".
His observation was that most landlords were "sitting tight" and most had rental income to cover the mortgage, but there were fewer people in the market buying university rental properties.
