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The Fall And Double-Digit Rise Of Christchurch

The Rebuilding Of New Zealand’s Garden City Is Now Well Advanced

By: Campbell Venning

1 January 2020

While the shocking loss of life (and subsequent buildings) from the devasting earthquake in early 2011 were permanently etched in many of our minds, almost a decade on from this event the rebuild of Christchurch has taken the city down a fresh new “liveability focused” path of architectural rejuvenation. As bars, cafes, restaurants, large employers, new green spaces and recently a covered stadium moved from drawing board to reality, the rise and rise of Christchurch as a completely redesigned new city creates new opportunities for property investors.

The market is at a tipping point where high yields, under supply, forecast rising rents and capital growth should provide for excellent cash and capital returns in the years ahead as the CBD population flourishes. With an estimated 6,000 people currently living in the CBD and a projected end game of 20,000, Christchurch Central is going to make Auckland and Wellington look quiet in the years to come. The current median sale price for Apartments/Townhouses at $475,000 in Oct 2019 is up 10.5% on 12-months ago (Source: REINZ) so the market is on the move and we see it accelerating like the great John Britton did when he turned the spotlight on New Zealand. It’s a mirror image of Wellington’s growth in 2015.

What’s Key For Investors In Christchurch?

Not all markets are created equal and Christchurch is no different. Population growth does not guarantee rental demand if you buy in the wrong location. Tenants are departing the cold and old, just ask any half decent property manager. Knowing your target market is key to maximising occupancy and yield. In Central Christchurch 39% of dwellings have one occupant and 40% have two (Source: One Roof) so why buy threebedroom properties in the CBD?

Small Is The New Big And Educated Investors Are Buying New

The dramatic fall in the average section size in the past 2 decades is changing the 21st century real estate landscape in New Zealand. As an investor it’s great news, as it’s the building that generates the rental income, not the land.

If you can buy new townhouses on smaller blocks of land, your rent on cost rises. Whether a townhouse sits on 100 sqm or 300 sqm won’t change your rent, but it will change the capital you have tied up in the higher land cost. Why would you own more land for the same rental income if you didn’t have to in a world that is downsizing? It’s possible to purchase brand new properties in Christchurch that are positive cashflow from day one (assuming 100% debt), with no maintenance for many years and that attract quality tenants.

Access To Early Stage And Wholesale Opportunities

The Property Factory is New Zealand’s only wholesale buyer’s agency and we have been working with a number of hand-picked developers in Christchurch to source and negotiate key Christchurch projects that deliver high rental returns and growth rates.

One of the highest yielding projects we have seen for some time is on Colombo St, 2km from the CBD where yields are up to 6.4% and cashflow surpluses of more than $5,000 per year starting at $330,000.

The new Christchurch has to be seen to be believed. I predict a lot of investors will look back in the next 5 years and wish they had entered or re-entered the Christchurch market sooner. With 10.5% growth in the past 12 months, this location should be on every investors radar.

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