Rental properties – what is the property market doing?

Source: NZ Herald – January 2013

This article was shared by the Auckland law firm conveyancing team at Quay Law.

Renters could be in luck, as a turnaround in the market has seen a flood of listings and brought prices to a standstill including in some of the country’s most desirable suburbs.

Supply is outstripping demand for houses and apartments in almost all regions, according to Trade Me Property figures for October to December last year.

The number of available listings has risen 8 per cent year-on-year, led by double digit growth in Manukau, North Shore, Wellington, and Hamilton.

In Auckland, supply is up 8 per cent while demand dropped 18 per cent compared with the same time the previous year.

Some of the city’s most popular areas saw the most movement, with supply up 2 per cent and demand down 28 per cent in the CBD.

Mt Eden supply was up 24 per cent and demand down 22 per cent, and supply in Remuera rose 21 per cent while demand dropped 17 per cent.

The figures were a turnaround from the previous year, Trade Me head of property Brendon Skipper said.

“In terms of supply, absolutely. If you take out Christchurch, demand has fallen away a little bit so there is a bit of a change of how people are in that rental market space,” he said.

The market could be the result of renters moving into the home ownership market and possibly people were staying put in their rentals longer than usual, Mr Skipper said.

Real Estate Institute of New Zealand chief executive Helen O’Sullivan agreed and said the figures also reflected a time of year when many students left their flats and people were winding down, so were less likely to move.

The figures are a strong contrast to early 2012 when demand for quality rental properties in central Auckland was at crisis point, with supply unable to keep up.

Then, agents reported having up to 60 people turn up to viewings, and renters resorting to extreme measures such as offering above the rental asking price to beat the competition.

As listing numbers have increased and interest from prospective tenants has decreased, prices have dropped off, said Mr Skipper.

“As a result, the asking price for rentals is up by only 3 per cent, considerably below QV’s recently reported 5.7 per cent increase in house prices.”

While the average rent has dropped by 2 per cent in Auckland, the Trade Me figures show a staggering 26 per cent jump in post-earthquake Christchurch.

With thousands of homes quake damaged and ruled uninhabitable, the rental market has spiralled towards a crisis over the last two years.

Tony Brazier of Braziers Property Management said January was traditionally his busiest month, but all of his university student properties were filled last August, and people are reluctant to give up their rental properties over fears they won’t secure anything else.

“We usually have about 150 people changing properties about now, but we’ve only got about 40 this year,” said the Christchurch real estate agent.

“When existing tenants are given the choice of staying at a higher rental or going into another rental, they’re choosing to stay. They’re scared of not having anything at all.”

Mr Brazier said demand remains unchanged, but there was only about a quarter of the supply.

The influx of rebuild workers is putting extra strain on the already cramped market, he said, and alternative options need to be canvassed.

Lodging could be a logical solution, along with purpose-built workers’ villages – one of which has already secured building consent.

However, rebuild work won’t likely kick in until later in the year, and Mr Brazier was afraid it would bring even more pressures to the already strained marketplace.

“We’ll be in an even deeper pickle than we already are.”

Many landlords outside Christchurch were struggling in over-supplied rental markets, and may need to drop asking rents to lure tenants, said Mr Skipper.

The exception was for student-friendly properties in university towns like Dunedin and Palmerston North as the annual flat-hunting season started.

In spite of the figures, there was always demand for good-quality rentals in desirable suburbs, both Mr Skipper and Ms O’Sullivan said.