Dunedin Market Update October 2020

by Dean Horo on Oct 14, 2020
Article appears under: Dunedin, About Property Investment,

Ask any buyer 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 and you will see a consistent commentary - "not enough stock", record prices, record rent levels, rental yields down, investors missing out on sales, the list goes on.

My experience over the last few months - and the stats - back up these claims.

So, 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 approximately 260 trade me 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% bracket for student investments and you are doing well to achieve a 5.5-6.5% yield in the suburbs
• 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 – 5-7yrs starting from now. Hundreds of new tradespersons, designers and consultants needing housed in Dunedin
• Otago University Infrastructure spend in the hundreds of millions in the next 5-10yrs
• 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 (no proof or stats on this one)

In summary, the market - if not hot - is very 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.

Sign up to be a Premium Buyer with iFindProperty and let us help you find a property that fits your personal goals and investment strategy in this challenging but rewarding market.

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.