Quarter 2 2018
As new government initiatives continue to hassle investors, the Dunedin investment market has continued to move forward, unabated by recent announcements extending the Bright-line test to five years (paying tax on capital gains) and the more recent announcement to ring-fencing losses around property portfolios. While both negatively impact investors, the strong entry point factors favouring real estate in Dunedin above other centres, and the apparent increase in demand from tenants is currently opposing these forces for many investors.
Property Managers are reporting significant early applications for student flats for 2019 and rental prices appear to be increasing with demand, more so than in recent years. The University has suggested more students are enrolling and announcements like the new $1.4 billion hospital build are underpinning economic and investment confidence in Dunedin.
From speculation to fact, sales volumes have increased since 2017, and yields have tightened in all three areas we monitor below, evidencing investors’ confidence in this market. Studio rooms were a particularly strong property type to purchase, which generally delivers a healthier cash return, and is in favour with more buyers than previously experienced.
Dunedin is still very much on the map for investors with the low entry point and relatively high returns when compared to other centres. The wider residential home ownership market is currently very buoyant, out pacing all the main centres for current year on year growth. This unpinning confidence is setting up Dunedin for a very strong year ahead.