The lethargic recuperation of the housing market is creating many opportunities for those who are either diversifying their investment portfolios or contemplating the purchase of their first rental property. With the income, ability to add value and generate capital gain and multiple tax benefits they create, rental properties are still a favourite purchase for the kiwi investor and contribute towards fulfilling future income and investment goals.

Coupling the trend of reducing residential values over the past 18 months is the longer term trend towards house value increases. With housing affordability indicators illustrating that it is harder than ever before for new home owners to purchase their first property, rental properties are experiencing a plethora of demand. Additionally, many individuals and families find themselves in a situation where they cannot afford to sustain their high mortgage payments in a time when recessionary forces are placing increasing financial pressure on homeowners, with increasing fuel and energy costs, food bills, the rising cost of children and the threat of redundancies. These pressures will induce many to sell their homes, with their immediate alternative for accommodation in the rental accommodation market.

Future population projections, released by Statistics New Zealand, present an ever increasing population (albeit reducing in yearly rate) with several trends that will appeal to rental property investors. Firstly, as the population increases, there will be unprecedented demand for the housing stock in New Zealand, which will increase the price. Many young families and aspiring home owners will progressively rely more and more on rental properties to cater for their accommodation requirements. Secondly, a structural change in the population due to ageing will create demand for smaller properties, with retired individuals choosing to sell their homes in response to financial pressures of their children and their own retirement, choosing to rent a small, maintenance free property. Lastly, a counter trend to the aging structure of the population will be experienced among the ethnic populations, with a growing proportion being aged between 18 and 30. This will create unprecedented demand for rental properties, especially in those regions and cities where ethnic populations are at their greatest.

In an April 2009 issue of Business Week, Prashant Gopal also confirmed that the market is providing reasons for property investors to be optimistic about the rental market, as future population growth will create increased demand through the period 2011 through 2015. He stated that the growth will be compounded by the lack in construction of apartments and single family homes, resulting in a shortage of rental properties for several years.

With current and forecasted demand only set to increase, investing in a rental property is a logical and secure investment that will not only create a regular income and capital gain, but one that is constantly appreciating.