Actually there is only one reason and that is there will always be demand. But lets look at other reasons which will ultimately put upward pressure on values:
1.Aging housing stock: those quaint villas are starting to fall down requiring new housing stock of which the cost of building is tied to inflation.
2.Household formation. The number of households is increasing meaning they need more homes to live in – be they owned or rental
3. Population growth. Not at a staggering rate but it will grow
4. Interest rates: currently falling – but regardless still low.
5.Economic growth: Slowing but still growing over the long term
6. Unemployment - Still low giving people confidence to borrow
7.Inflation: Still low giving people confidence to borrow
8.Expectations. Over the long term NZ’ers still expect property values to increase
9.Bricks and mortar; Property still gives a sense of security for parking your money. 1987 and 2008 will be forever cast in potential share investors mind. 2007 and 2008 will be remembered for the collapse of Finance Companies. Sleepyhead has not reported increased sales in mattresses.
10.Home ownership. The kiwi psych is to “own our own home” and not to rent. We yearn to be a landlord. This is generational and won’t change overnight.
11.Tax System: Still favours rental property. Also little beats the return on investment by paying a dollar off the mortgage.
12.Dwindling supply of trades people. With Australia having a minimum wage of $17 the cost of building will increase which has to flow into the value of improvements on a property. A “knowledge economy” doesn’t encourage people towards lifting a hammer.