Rental property shortage heading to crisis

July 4 2012

Rental property shortage heading to crisis

A large proportion of tenants in New Zealand are facing rent rises and many people are having a hard time finding a place to lease due to property shortages, First National’s quarterly property management survey shows.

“The rental property shortage continues to be a national trend fuelled by lack of construction of new homes and subdued investment by developers,” General Manager Colleen Milne says.

“Some of the contributing factors to the shortage are the cost of new buildings and the costs of consents due to stringent council requirements because of the leaky home issue,” she says.

“Rent prices continue to increase across the country particularly in Auckland and Christchurch. The lack of affordability for first-home buyers with families may result in many families being unable to climb out of the rental cycle into home ownership,” Milne says.

Multiple applications for rental properties are the norm, particularly if properties are of superior quality, she says.

A consequence of the property shortage is tenants are choosing to live in affordable locations and spend more time travelling to their workplace.

“The areas of the country where rents are still affordable often reflect the limited work opportunities within these regions,” Milne says.

“While First National property managers report that low returns and the depreciation changes are still putting landlords off investing, there’s been a surge of investors re-entering the market, particularly in Auckland.”

The quarterly survey measures property management vacancy rates, rent rate movement and demand/supply experienced by property managers in the First National network, which covers the length and breadth of New Zealand.

Nationally, 42% of First National property management offices say rents in general have increased from a year ago.

Rents are up across the board for Palmerston North, Glendene, Waitakere, Epsom, Papakura, Dargaville, Nelson, Motueka, Christchurch and Ashburton.

The most expensive region to rent in is Auckland where the average rate for a studio is $225 per week, two-bedroom flats cost $300 while houses are $346, three-bedroom flats are $370 while houses are $402, and four-bedroom houses fetch on average $468.

Taranaki has the lowest average rent for three-bedroom houses at $266 per week, while the central North Island has two-bedroom houses at $215.

The lowest rates for studio, two-bedroom flats and four-bedroom properties are in Southland, where a studio is an average of $110 per week, a two-bedroom flat costs $210 on average per week and a four-bedroom place rents for $285 on average.

First National Ashburton property manager Veronica Monaghan says the market has changed dramatically in the last few months.

“House sales have picked up in Ashburton and investors have been selling their properties to families, so there are many tenants looking for alternative accommodation,” Monaghan says.

“There has also been an increase in the number of people shifting here for work and they are competing for rentals in a shrinking market,” she says.

“The average working family is struggling to find affordable accommodation in Ashburton.

“Last year a three-bedroom house would have rented for $300 a week. Now the rent is $340-$350 per week. That extra $40-$50 is a lot of money, particularly for a single income family,” she says.

According to the survey, 44% of First National respondents record two-bedroom rent rates the same as the middle of last year, while 47% of those surveyed say three-bedroom rent rates are up.

With regards to four-bedroom places, 42% of First National property management offices say rent rates are up compared with June last year.

The places with the lowest vacancy rates in the North Island were Cambridge, Te Awamutu, Papakura, and New Plymouth.

In the South Island, Nelson and Christchurch had vacancy rates below 2%.

The majority of First National offices across the country noted shortages in all property types and all property price brackets with only two-bedroom, mid-priced properties leaning towards demand being balanced.

The only area which noted property shortages entirely across the board was Christchurch.

At the other end of the scale, Cromwell noted an oversupply of all property types and price brackets due to more people leaving town.

First National Papakura Director Stuart Millington says, “Our occupancy rate is around 99%. There’s high demand for good quality properties and we receive multiple applications for each vacancy.

“Rents are increasing steadily and we have a shortage of properties due to a lack of new houses being built in our area in recent years,” he says.

“While new home building has picked up recently, it has tended to be for owner occupiers, rather than investors.

“Prospective tenants need to ensure their applications are filled in clearly, they have solid references and a good credit history,” Millington says.

Families are the most active demographic searching for a rental property, according to 69% of First National survey respondents, followed by young professionals on 19%.

ENDS

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