The REINZ have just released their June figures and their headline comment on the Manawatu/Whanganui region says it all:
“The Manawatu/Wanganui region saw the strongest growth in median price in June with a 23.3% increase to a new record median price of $370,000. This was the result of a 17.8% decrease in the number of properties sold below the $250,000 mark and a 17.5% increase in the number of properties sold in the $250,000 to $750,000 mark.”
Palmerston North alone hit a record median sell of $460,000, up from $420,000 in May and $387,000 year on year.
Inventory sits at 10 weeks and the days to sell sits at 30 days, compared to the June 10 year average of 49 days
The reality of the Palmerston North market is being illustrated by a continuation of multi offer situations and a lack of affordable property listed under $350,000. Multi income properties with decent yields are like hen’s teeth as desperate first home buyers snap up anything that fits the budget. Why wouldn’t they? Rent is now about the equivalent of a $300,000 loan at 4%. An agent told me a story of one client who’d missed out on properties multiple times, and in desperation offered $60,000 over the asking price to secure her first home.
The reality is that I’d expect to see another squeeze on rents as the shortage of housing increases. This might be when the Reserve bank decides to ease LVR restrictions. This fresh wave of frenzied buying activity will displace more of the renters’ pool. The maths is pretty simple. A tenanted property might have 4-5 occupants, whereas an owner occupied might have 2.
Ever popular rental suburbs like Terrace End, Central city, Takaro, Fitzherbert and Awapuni are now giving way to Roslyn, West End and Milson which were traditionally ‘cheaper’. Now they’re affordable. After all, the Manawatu/Whanganui region has had the strongest House Price Index growth in the last 12 months of all of the regions.
We can still find 8% yields in Whanganui and the other option is commercial. I wouldn't expect to find 7-8% yields in Palmerston without significant maintenance.