Rental investment 'critical'

In New Zealand most rental houses are owned by small private landlords and they may well be scared off investing as capital growth slows down.

That just leaves substantial private investors and the Government.

"Significant government and private capital is required to meet projected strong demand for housing," a recent report says.

"Private sector investment in rental housing will be critical."

The report, written for the Centre for Housing Research Aotearoa New Zealand, doesn't crunch the numbers to see just how bad the shortage of housing would be, but considers how affordability may affect that picture.

"It's really focusing on that group of households who are working and can't afford to buy," said co-author Ian Mitchell, of property consultancy DTZ.

That group virtually doubled between 2001 and 2006 to more than 187,000 households.

The number of renters is expected to increase by 30 per cent by 2016, reflecting population growth and those "locked out" of home ownership.

"Where are all these houses going to come from for these people to rent?" Mr Mitchell asked.

Property investment looked less attractive over the next few years because of the lack of capital gain, "although rents are likely to go up if you have a strong hike in people wanting to rent property".

Rents were also expected to go up because there were likely to be fewer rental properties around.

Competition between renters could see wealthier renters push traditional low-income renters to the margins.

The report says other changes in society will be reflected in housing. A greater diversity of people renting will mean demand for a greater range of house sizes.

Expectations of housing quality and longer tenure will also rise.

The elderly, who will represent a quarter of the population in another 40 years, will particularly have an impact.

The location of affordable housing is also expected to be important around New Zealand for "essential jobs" such as nursing, teaching and police.

Some regions depended on low-cost accommodation to keep their workers. Failure to provide low-cost housing to fast-growing regions such as Nelson, Tasman and Marlborough will have consequences for intensive industries such as horticulture, the research centre says.

- © Fairfax NZ News