Residential investors quit Canterbury properties en-masse

A flood of Christchurch property owners wanting to quit the residential investment market has seen a portfolio of 20 suburban homes, inner city apartments and townhouses placed on the market for sale in a one-off auction.

Leading real estate agency Bayleys is undertaking the marketing of the portfolio – which includes individual two, three and four-bedroom properties throughout Christchurch – under the banner ‘Grand Investment Realisation Auction’.

Headlining the auction portfolio is a block of six flats in the suburb of Merivale under one title – consisting of five two-bedroom units and a three bedroom dwelling – generating a combined weekly income of at least $1500 when fully tenanted.

Bayleys Canterbury residential manager Phil Hayes said the influx of vendors placing their holdings on the market had come immediately after the Government’s Budget announcement on May 20 – with the consequent removal of depreciation rebates on investment properties at the end of this current financial year.

“For a number of smaller residential property investors who had factored depreciation rebates into their investment return figures, the removal of this option has now made their holdings less attractive,” Mr Hayes said.

“It should be pointed out though that for the large number of investors who never factored depreciation claims into their bottom-line equations, there has been no change at all to the investment value they see in residential real estate.

“Those investors who based their business models on yield rather than capital gains are more than happy to continue collecting rent and waiting out the current market malaise.

“However, a number of properties in this campaign are highly leveraged and are therefore not in a position to ride out debt commitments in the current market. I understand that the banks are now placing some of those vendors under pressure to reduce their debt levels – hence having to place these properties on the market for sale. ”

Mr Hayes said many of the properties coming up for auction on June 30 had tenants in place and would be sold as ‘going concerns’ - with weekly income ranging from $215 per week for a two bedroom flat in the city, through to $400 per week for a three bedroom home in Merivale.

“From an investment perspective that is particularly attractive as it means there is no ‘down-time’ while new tenants are being found,” he said. “Rental yields greater than five percent - calculated on council valuations and 49 weeks rental per year – could be easily achieved.

“At a time when banks are offering on-call deposit interest rates around the three per cent mark, that is certainly a premium.”

Mr Hayes said the nature of the properties included in the Grand Investment Realisation Auction meant they would also be suitable for entry-level or first-home buyers. Of the 20 the properties set to go under the hammer at Bayleys on June 30, two were owner/occupier residences suitable for conversion over to letting.

“Most of the properties have council valuations in the high $200,000s – mid’ $300,000 range, so using this as a broad pricing indication, they would be affordable for young couples or single professionals wanting to get onto the first rung of the property ladder,” Mr Hayes said.

“Simultaneously though, this type of low maintenance, easily rentable property profile is exactly what investors have on their tick-list, so we anticipate there will be strong interest from these two competing sectors.”