Rental shortages continue

Media Release
1pm Thursday October 28, 2010

Rental shortages continue

What do Auckland city and 4-bedroom properties have in common?

Both are in short supply for prospective tenants in New Zealand, according to First National Group’s latest quarterly residential property management survey.

The major trends showing up over the past six months are continuing, with a nationwide shortage of 4-bedroom properties, demand for all types of rentals in Auckland and a small overall increase in rents.

Every quarter First National surveys its nationwide property managers who manage around 5700 residential properties on behalf of landlords.

Its last two quarterly surveys have shown availability of rental property in Auckland decreasing and this trend continued, with a vacancy rate in the quarter to mid October of just 1.7%, where it has hovered since January.

However, in the rest of the county (excluding Christchurch) vacancy rates have either remained steady or slightly increased, with a national increase of 1.3% (to 6%) on the same time last year.

The balance of supply and demand shows supply of two bedroom properties is even, but three and four bedroom homes are in short supply, although there were regional differences in whether high end or low end properties were in demand.

Interestingly, while 87% of respondents reported shortages of 4brm homes in their areas, only 30% reported rent increases for 4brm properties.

First National Group General Manager John Stewart said people were still seeking options to save money.

“As one would expect, those areas where it is proving difficult to fill properties, rents have remained stagnant or even dropped. We still hear tales of younger tenants and couples heading back to parents’ homes, or several couples moving together to share larger homes.

“In those areas, predominantly regional towns and cities, landlords are working overtime to retain tenants” he added.

Demand for three bedroom properties had a much stronger correlating rent increase with shortages in 65% of regions and rent increases for 3brm properties in 41% of these same regions. Rent increases ranged between $5 and $20pw.

“Indications remain that people moving to find work and unable to sell their homes are renting them out and correspondingly, renting in their chosen centre” stewart said.

“Noting the cost of money across the Tasman alongside the high value of their dollar, we anticipate Australian investors will return to investing in the NZ rental market in the next quarter” commented Stewart, “especially given recent migration figures backing our prediction in April that Kiwis will stay home in the face of Australia’s slowing internal economy and non-mining job market.”

Shortages of 2brm properties showed up in half of reporting regions but oversupply of 2brm properties showed up in the other half.

Regional highlights

• Northland – stable rents with similar vacancy rates to same time last year but shortages of 3 and 4 bedroom homes.
• All Auckland offices reported shortages of property available and rent increases of between $10pw and $50pw in this past quarter, compared with the same time last year.
• Te Puke has more seasonal workers than last year, helping fill rentals in the Bay of Plenty but shortage of low-end rentals.
• Wellington reported an oversupply of properties across the board and rents unchanged.
• Marlborough has almost twice its usual vacancy rate for this time of year, at 8%. This is mainly due to a drop in the number of seasonal employees required because of the struggling viticulture industry. However, property managers report an influx of temporary house hunters escaping quake-hit Christchurch has softened the impact.
• Nelson area reported more people renting before buying.
• Christchurch’s rentals have been hit hard by the earthquake. One of First National’s property managers reported over 80% of his properties had earthquake damage. Anecdotal reports of landlords of non-damaged homes increasing rents by $50 per week due to demand.
• Rentals in many of the North Island beach and holiday towns are being snapped up, but this has yet to happen in the South Island.
• Central Otago reported a lack of tenants and corresponding rent decreases of $20 per week. But even here 4-bedroom properties were scarce – both high end and low end.
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*Note: Due to the earthquake, Christchurch’s figures were not included in the survey’s statistical results as they were not comparable to the previous quarter or to the same time last year. An adjustment will be made in the next reporting quarter as damage assessment shows up true vacancy and rent changes.

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