Dunedin Market Update September 2020
Ask any buyers or sellers agents who live and work in Dunedin, or follow any of the abundance of real estate company/mortgage brokers blogs and webinars on the Dunedin property market before and now post Covid (if there is such a thing) and you will see a consistent commentary: not enough stock, record prices, record rent levels, rental yields down, investors missing out on sale, the list goes on.
And the stats back up these claims. Did you know at the start of 2020, Dunedin had a higher median house price than our friends up the road in Christchurch?
I know - who would have thought.
Including stating the obvious, here are some of the potential drivers and some supporting stats relating to the present investment scenario in Dunedin, in no particular order:
- Historically poor-quality and insufficient housing stock for the existing population
- Lack of available land for development close to the city
- Property listings at all time low (unsure of the record low but approx. 260 TradeMe listings for Dunedin/Mosgiel and surrounding area is just not enough)
- Dunedin rents getting up near Auckland rental prices. If you don’t believe me, check out the upper level rents of 2-bedroom rentals in the student/city centre
- Record low interest rates – no explanation required there
- Gross Rental Yield now in the 5-6% bracket down from 6-7.5% bracket for student investments
- Some Investors who can’t be bothered upgrading rentals as a result of the new Healthy Homes regulations are exiting the market and these properties are being snapped up by first home buyers, resulting in less rental housing stock. I have heard this mentioned but unsure if it’s true. Sell and do what with the $$, put it in the bank, don’t think so…
- Dunedin Hospital Build – 5-7 years starting from now. Hundreds of new tradespersons, designers and consultants needing housing in Dunedin
- Otago University Infrastructure spend in the hundreds of millions in the next 5-10 years
- Tertiary student numbers (Uni and Poly) predicted to increase year on year, even before Covid hit
- Continued pressure on housing stock with expats returning from overseas and maybe even Aucklanders relocating to the safety of the deep south (no proof or stats on this one)
- Dunedin house prices increased by 11.4% over the past year to $519,000
Queenstown house prices increased by 9.5% to July 2020 to a record median price of $1,100,000 but dropped again in August 2020 by 14.5% to $940,000
- "There is a considerable amount of enquiry coming from out of the area, particularly from Southland, Dunedin, Christchurch, and Auckland. It appears many people are either wanting a second home for holiday use or to live in at a later stage. Buyer enquiry is not showing any signs of slowing down at present". Gail Hudson, REINZ Regional Director (REINZ Property Report August 2020)
In summary, the market - if not hot - is very warm and set to continue that way as a result of the drivers mentioned above.
So where are the investment property opportunities in Dunedin?
- Be prepared to reno “older” stock to lift rental yields and property value
- Take advantage of the Dunedin City Council’s new Second Generation Plan (2GP) which offers increased opportunity for development and subdivision (a bit like the Unitary plan for you Auckland investors)
- Add a bedroom(s) and/or ensuites/bathrooms as allowed under the new 2GP
- Flipping – unsure about this one in this market, unless you are highly skilled in this space. Never say never.
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Dunedin iFindProperty Agent’s recently completed development in a suburb close to the Uni/City, only possible due to the Councils new
2GP. Read more about this deal here.
Next time …a focus on the Queenstown market and what an interesting market that is! Plus, a case study of
an investment purchase in Dunedin by one of our Premium Buyers.