By Bernard Hickey
TV3 and NZHerald have reported this morning "it's rental market madness" in Auckland with queues forming at open homes for established family homes to rent in Auckland.
Two rental property agents in Auckland were quoted as saying landlords returning from overseas had reduced supply and a lift in demand from former homeowners looking to rent was responsible for tightness in the market that was driving up rents.
"An agent who listed a four-bedroom property in Balmoral said he received 200 inquiries on the property before letting it out last weekend," the NZ Herald reported in a front page lead article titled "Rental Market Madness".
A property in Ethel St, Kingsland, attracted more than 200 would-be renters during a half-hour open-home, it said. "It's going to be very easy to rent it. Narrowing down the list of tenants is going to be the hard part, to be honest," landlord Dave Smith told TV3, NZ Herald reported.
Rental agent Darryl Goode was reported as saying it was not uncommon for hundreds of people to register their interest in a property.
"Give me another 10 or 20 three-bedroom houses and I could let them all out in a couple of days," Goode was reported as saying.
Goode said there was a "severe shortage" of stand-alone houses to let in the city-fringe areas, and the market was the tightest he had seen in his 12 years in the industry.
"It's rental market madness. Queues forming even to get into open homes," Adam Hollingworth from TV3 News reported.
The same rental agent, Darryl Goode told 3News he had never seen a tighter market in 12 years in the business.
“There are a lot of disappointed people. If I had another 15 three bedroom houses in Mount Eden I could rent them all this weekend," he said.
Here is more from the NZ Herald article:
Harcourts rental manager Lesley Whiting said her Browns Bay office recently lost to returning landlords about 10 of the 300 properties it was managing, and was currently listing only two rental dwellings.
Real estate agency Crockers recently reported that the average weekly rent for a three-bedroom home in central Auckland was $580 in December, up 16 per cent in a year. For Takapuna/Milford it was $670 (up 26 per cent) and Remuera $690 (up 25).
"It's got nothing to do with landlords wanting to capitalise from the World Cup, but the economic crisis which is forcing more people to come home and stay home," Ms Whiting said. "Who knows how long this is going to last, but it's really reaching crisis point for people looking to rent today."
But what do the figures rather than anecdotes actually say?
We monitor rental property listings on trademe.co.nz and realestate.co.nz every week. See the interactive chart of our index here and below.
It shows that nationally the number of properties for rent, including both houses and apartments was up from a year ago, not down as suggested in the articles above.
Realestate.co.nz figures are not strictly comparable with a year ago because they have included figures from bookabach.co.nz in recent months.
But Trademe figures show the number of residential properties for rent nationally has risen to 12,113 this week from 10,647 in the same week a year ago.
But something is happening in Auckland, although nowhere near the extent suggested in the TV3 article and NZHerald that followed up (and quoted from) the TV3 article.
Trademe listings figures for Auckland show 3,566 properties listed in the last week, compared with 3,566 listed a year ago.
Statistics also show rents are not rising nationally and are not exploding to the extent suggested above.
Median rents nationally as recorded by the Department of Building and Housing through its bond registration service have been flat for three years at NZ$300/week. See the interactive chart here.
However, rents for 3 bedroom properties in Auckland have risen from around NZ$430/week in February 2008 to NZ$465/week in January this year.
One issue not mentioned at all in the TV3 and NZHerald articles is that demand for rental properties, particularly multiple bedroom houses for rent in central Auckland for students, is usually red hot at this time of the year as University begins.
What are you seeing?
No chart with that title exists.
122 Comments
I'm keen to know what are the most and least influential of the causes listed in this section of The Herald article?
"Changes to tax laws last year, which restrict investors on what they can claim in depreciation, have deterred people from investing in rental properties, says the Property Investors Federation.
Vice-president Andrew King said costs were also rising faster than capital gains, and rental returns were not matching up with mortgage rates, leaving many would-be investors feeling "it's not a good time to buy".
A lack of new houses being built also meant supply was not keeping up with demand fuelled by population growth.
"It's usually a seasonal thing, but the big drop in supply of rental homes in Auckland this year is somewhat unprecedented," Mr King said.
"The situation is more pronounced in Auckland, felt more at this time of the year because it's when people relocate, decide to move houses, and international students start coming back," he said.
Mr King said the situation could change if rising rents resulted in better yields for landlords, and more people started investing in rental properties again.
"It will help to meet the demand, but I do not see rents going anywhere but up."
What's causing the crisis?
*More investment homes are being sold by owners wanting to cash up. [Where do those homes go?]
*Hard times are forcing homeowners to sell and join the rental market. [Where do those homes go?]
*More overseas-based landlords are returning home.
*Changes to tax laws. [So that might influence the first cause listed. Where do those homes go?]
* Fewer houses being built. [In terms of new rental builds that might be influenced by the tax related cause listed above, however, are there stronger influences leading to this outcome?]"
Cheers, Les.
Great summary BH. I think the rental agencies are just talking it up, just like real estate agents, and the Herald has fallen for it again. The Trademe figures are more accurate because it has private listings included, i.e. not all rental listings go through agencies.
When I was a student we didn't go for 3 bedroom bungalows in Mt Eden :)
http://www.crockers.co.nz/media/43713/december%202010%20rental%20prices.pdf
When I was a student back in the '90s, we did. There were six of us in one 3 bedroom bungalow in Mt Eden. The rent was quite manageable after being split between 3 couples. My guess is that during these tough times there'll be more than 6 kids shoehorned into those places.
Anyway, it's a measure of genuine desperation to believe anything said by anyone in the real estate game.
REALLY?
Considering we slightly overlapped at Massey Uni during Student days - my rule for paying rent was never to pay more than $40 a week. That was 20 years ago.
Rented a fair few absolute dumps - but meant I was always flush relative to other Students paying $60-75 at the time.
Living with g/f's at Varsity - yuck. Flat only with guys - can exist in absolute squalor that females couldn't stand. Cheaper rent all round.
"....former homeowners looking to rent...." So what happened to their former house? Did it burn down! If sales turnover is in decline, it suggests that even if 'the homeowner' is now renting, he must have either put his former home on the rental market , at I assume a higher price than he is now paying in rent, or has left it empty ( which defeats the objective of moving and renting!). As a matter of curiosity,I checked in with my building manager this morn, on the way back from getting the Herald, and asked him if he saw any lag effect from Chinese New Year being later this year. "No" was his answer, and he still has 'quite a few' vacant apartments on the rental market.
Surprisingly, stronger demand in ChCh too.
I let a moderately earthquake damaged house in Avonside easily last week with about 15 enquiries (actually wrtitten off by the insurer because of expensive foundation damage but otherwise structurally ok).
Another in the CBD was let at $50pw more than last year despite being severly damaged (over EQC cap, but engineers report says is structurally safe). The EQ repairs so far are a $3 roll of sticky tape (to reattach the wallpaper!).
Although we are struggling to find takers for one CBD property that we have normally let to female polytech students on a room by room basis however I think that one is possibly the earthquake effect deterring tenants from this particular property.
It's hard to judge these things (price moves) till well after the horse has bolted. So we will wait and see.
However Matt in Auck, Nicholas Arrand and co perhaps should reconsider their strategy to rent while prices fall?
I reconsider my strategy , all the time, Chris_J, and see no reason at all to change tack :). I still remain of the view, that had I more of anything to sell, I would!, and when interests rates fall to near zero, I shall borrow with my ears pinned back.... and still wait.
Reluctant Landlord, that is to be expected, with Massey University in your area the students are creating a temporary undersupply...in a few weeks time you'll find demand will drop considerably...and then when summer holidays begin around Nov / Dec there will be an oversupply as many students move back home to save on rent..
Nice idea. Wife might not be thrilled with me working on weekend... but you're right. More real evidence the better. Let's crowdsource it.
Welcome reports of what everyone is seeing.
Although I tend to rely longer term on stats rather than anecdotes.
cheers
Bernard
Here in Nelson LL's and REA's are still trying to force rentals up with even the very low quality of buildings. The economy here is flat with much commercial property sitting empty with the owners still wanting 2006 rentals prices. I know many firms in the building industry here are 'buying in' work to keep staff.
This was interesting, Our LL has just decided to sell which is odd considering they have no mortgage on the property (personal debts i think) so we are moving on after 3+ years which is fine as we wanted a change.
Good stuff, Justice! And it doesn't really matter if you do have to pay 'more' rent ( but I'll bet it will still be cheaper than owning whatever it is you go to!), as you don't get to pay the tens of thousands of dollars worth of R/E commissions associated with selling where you are leaving!
I say it has turned, which is good as 2010 was a shitter, with good quality tenants for lower quality housing rare and few between. i found it swung back to better times just before Christmas... phew...
All i want to do is shop around to find some more rental properties for the portfolio...
President of Property
i found an honest landlord, clean accomodation, and an open line of communication, and good neighbours (all ours) have better returns than the marble and chrome - as i doubt the returns on goldplating the premises will give any of our clients any more money to pay rent with.
and an older homes yes, even grotto maybe but not a slum, not since we had possesion anyway. i also found making little improvements when possible and attending to maintenance in a timely manner is necessary, who out there wants their property to turn into a shit hole anyway.
maintain the properties, and the relationships with any tenants, accountants, lawyers agents and the like and it's all going to become happy days again - for those of us that survived, the ones that were always honest and just doing it for a tax break from the get go.
but i do like your smile ;-)
Chris J - always keep an open mind, if there is the right place at the right price, maybe! (actually there is one place I'm interested in at the moment)
As for the article - well its mainly hype. As people have stated, there is always pressure this time of the year. Sure it might be a bit greater than usual, as fewer young people buy (because its generally unaffordbale) more will look to rent. but with more kiwis moving to Aus this year, the pressure valve will be relaxed
As usual you unbelievers, whinger and whiners got it wrong and Olly Newland got it right.
As long ago as April last year. Olly warned of the looming rental crisis, fed by looney new tax laws, lack of building, and a chorus of doomsters who predicted the end of the world, and a curse on all property investors.
And he says it will get worse- much worse- predicting a doubling or even trebling of rents, chock horror stories of over crowding and squalor, and more mis directed abuse at property investors.
Investment in good quality rental property should be encouraged, not discouraged but the thick heads in authority let alone on this site cannot grasp that simple fact.
read extracts from Olly's April 2010 article:
"RENTS SURE TO RISE
Olly Newland’s Column, April 2010
The latest statistics make interesting reading indeed. What they show is there has been a huge surge in people choosing to rent. There will be serious consequences if this trends continues … which I am sure it will.
Many have come to realise that renting is still far cheaper than owning especially while capital growth remains so elusive.
The last surge in renting was in 2008 but for different reasons. The rise in house prices and the higher interest rates prevalent at the time forced people into renting. Now the picture and the reasons have completely changed.
A surge of renters as the statistics show right now, has a knock-on effect on rental levels in the medium and long run. There is always a lag factor, but as the number of available rentals dries up -- whether shoebox apartments, houses or flats -- the pressure will comes on. "
read the full article here and weep:
http://www.ollynewland.co.nz/rents-sure-to-rise/118/
"And he says it will get worse- much worse- predicting a doubling or even trebling of rents, chock horror stories of over crowding and squalor, and more mis directed abuse at property investors."
Bring it on! As a renter with excellent cash reserves and 3 passports I wish them all luck! I could buy tomorrow but chose not to feed a scheme so off kilter that it has no where to go but down the gurgler. Looking at moving to the States in April where maybe buying is more realistic now
Justice - spot on with your first 2 lines ! What are people like OllyN wishing on this country !! ... and where do these PI's think this money will come from ... that is my question? ... they are very creative "wishful thinkers" those PI's.
I rent as well and could easily buy, but why would I at these inflated prices ! ? I am speaking for the central Auckland area, which prices are still in lala land....with NO hope of capital gains.
Goodonya for heading to the States. I was there for 3 weeks last April, mainly in Northern California and really enjoyed it ...... talk about property bargains all over the place and better build quality as well.
I have 2 passports .... but not the one necessary for the above :(
If only some of that $ 120 billion of borrowing to buy houses had gone into something productive instead ...... New businesses , factory expansions , entrepreneural start-ups , innovation , up-skilling .......... But no , it all went into houses , lumpy bits of brick and mortar , ....
... Kiwis never learn , this time is not different ....... Gurgle gurgle ......
The opportunity cost is the thing , Murray . Once built , the house just sits there , unproductively , and begins to rot ....
.... The same amount of munny biffed into a productive endeavour continually adds to the growth of the country .
Kind of alike the choice between titivating up your car's body with some customization , versus doing something to the engine to give the beast more power .
Gummy, it won't rot if you maintain it! But again, that requires workers and factories. My rentals periodically employ lawnmowing contractors, gardeners, roofers, plumbers, electricians, painters, window manufacturers, advertising agencies, accountants - the list goes on.....
Yeah...imagine waking up tomorrow to discover none of it happened...that Cullen had made the honest decision in 05 to throttle the borrowing at the cost of dropping the election...and National had come along with Brash at the helm...by now we would be sick to death of him and Labour would walk back into power this November.
"where do these PI's think this money will come from ... that is my question?"
Don't worry about where the money will come from. Governments worldwide will keep electronically debasing currencies to make sure there's plenty of the worthless stuff going around. We've already lost the 1c, 2c and 5c pieces. Next to go will be the 10c,20c and 50c. The $1 coin will be small and copper coloured (i.e not made of copper!) and we will no longer use decimal places (.00) on prices.
Remember it's not just house prices. Petrol was 75c a litre 10 years ago, now $2. I just went to our local dump that was $12 for a trailer 10 years ago, now $32. The list goes on and on. Wages have gone up, but they're always in catch up mode - that's the joy of our inflationary monetary system........
And here's the ultimate trap in that arguement, Murray. Come the time for you to sell anything, say your house, what are you going to exchange it for ? Money. But you will need/expect a premium to do that if you see the value of money being eroded by inflation. How is that premium determined? Interest rate. So if your scenario holds true, then interest rates will rocket. ahead of asset price movement; and who'd going to borrow money to buy your house if the financing costs are going to ever increase? And at some stage you too will have to refinance, and with wages lagging ( that's rents lagging as well. You can't pay rent with what you don't earn) you will likewise suffer the pain of escalating financing costs. Those who just have the despised money, will be compensated, immediately, with those higher interest rates.
But you expect 0% interest rates and presumably deflation with it?
I don't see how deflation is possible long term when governments can print money (QE), have printed money, and will print more money!
You're right that high inflation would create high interest rates, but those with assets would be compensated by higher prices. But even at 5% inflation prices double in about 14 years. Funny Munny in the bank is not for me, thanks....
Yes I do. And reducing asset prices and increasing living-item costs. The more money is 'printed', the worse the situation must underlyingly be - no? And as you infer, you can't eat paper( well not too much anyway!). So people with assets are going to sell them, to buy, for want of a better word, food. In New Zealand, as other countries are doing, the way to add disposable income to families it to reduce their interest costs. That's my 0% OCR rational. How else are we going to sustain most people? Wage rises? I don't think so. And as we are seeing, yes, deflation, but in it's real sense. A reduction in the money supply. That's austerity ,debt repayment and much lower property prices.
I live in Mount Wellington, Auckland, about ten minutes drive (assumming not rush hour) to the CBD. The Indian guy in front of me owns the houses either side to his own. Both had Harcourts for sale put up outside over the weekend. I had a chat with him. he reckons to expect a deluge of rentals coming onto the market in the next few months, before the law changes kick in. His humble opinion is that it's nearly impossible to make an honest buck renting in Auckland given house prices, and only those who bought ten-plus years ago will get anything like a decent return across the life of the rental.
Daughter back to varsity soon easily found a nice flat near rail station in eastern suburbs. Cheaper than prior year flat and much newer/cleaner. Very inner city places seemed to have a lot of demand from student age people probably due to transport costs and time losses. But the quality and upkeep was appalling.
A lot of available towhouse/flat (investor?) type accommodation in the ‘burbs. We were not looking at the family home type accommodation market.
Another story in the property saga. This will only come to a hold ones credit contracts. And this is where I went wrong. I foolishly believed that financial austerity will be triggered by a common realization that overspending is not sustainable. Now, I am inclined to say that we will need a real crisis (instead of a perceived one).
If the access liquidity inflates rents to close the gap to the recent house price inflation - I may have to move further away from the town were the opposite seems to occur. Actually, this makes for a good question: Why does Auckland show signs of inflation (in the housing market) while many other parts of the country appear more deflationary?
We've had no recent change of tenancies to comment on, but the responses we had last year were the busiest for probably about 6 years or so.
I'm not sure TradeMe listings are an accurate indicator, they've been constantly growing since TM started doing property as more and more people switch from newspaper ads to internet ads.
I think a better indicator is vacancy rates, and there's a lot of agencies with very few vacancies on their books......
It is going to get interesting during this year as the election campaigning kicks in.
National will at least try to tighten up what it sees as loopholes in rental situation, Labour is prepared to go a step further and bring in ring-fencing, Greens want full on capital gains of investment properties. If investors get too nervous watch out for more sales pressure and flip-side could be a rental availability crisis. Any serious prospect of a Labour led government dependent on the Greens will probably result in a flight of capital and a financial crisis as well.They wouln't be so stupid would they??
What's going to happen to the actual houses, me? The capital may fly off back to one of many places; debt repayment comes easily to mind. But the houses?....they'll still be there; either owned by someone ( one less renter) or owned by another landlord at a better financial entrypoint.
There may well be campaigning but it will all be a red herring. The truth is Apr 1st this year marks a big change when Nationals change of rules kicks in. The removal of depreciation of buildings will probably be enough to push quite a number of highly geared landlords over the edge. I predict his will bring a flood of rental properties onto the market, as they have probably been hanging on and hoping the market will improve over the last year or so.
Capital gains tax is such an irrelevance. House prices haven't had capital gain for 3 years and are unlikely to for the next few. So how will that help anything except make havenots feel better about themselves.
So all those whingers complaining about high house prices may have their wish come true later in the year. However, they may also find themselves without a job, as the economy takes a dive too.
The new rules kick in 1 April but the cash flow implications don't start until first provisional tax payments in 2012. For the average rental it will be about $22 per week. In Auckland this is less than the average rental increase that has already occurred over the last 18 months. The depreciation tax-treatment change by itself is unlikely to cause any significant increase in the number of rentals going up for sale this year.
twMwnmsdc.
Luck has nothing to do with it. It's called planning, being realistic, and doing the numbers.
Who is going to sell their rental just because they have to pay an extra $22 tax per week when the rent has already increased by the same. Many here thought the depreciation changes were a brilliant idea, when in fact the tenant has effectively ended up paying for it.... who would have thought.....
It's part of the reason, speckles. Rental Property is a business, and just like any other business if your operating costs are increased you will endeavour to recoup that from your customers, if at all possible.
But you're right, there are other factors at play as well... the main one being that there are very few new rental properties being bought or built and the population keeps growing...
Actually, the $22 is a cash cost. The non-cash deduction would be the $3,000 claimed on building depreciation (this amount varies depending on value of building and how long it has been depreciated). If you can no longer claim this, you will pay around $1,000 more tax, which is a cash cost and comes directly off your bottom line.
You're right that it shouldn't be having an effect yet, but that's human nature for you. If a motorway is proposed beside your property for 20 years time, it will drop your value straight away in anticipation of the event. When the price of oil goes up, the pump price goes up straight away.....
I still think the main driver at the moment is population growth coupled with low residential investment, but hey that's what National and many readers here wanted.... the old saying "be careful what you wish for" comes to mind... steering people away from residential investment was/is always going to cause some obvious side effects....
I have a house 6kms from CBD. 60% of value is in the land. The site could easily accommodate another house on the rear which complies with every single rule in the Plan other than ... density.
Therefore that bit of land, which could easily fit a decent 3 bedroom house for a first home buyer, sits there empty and the house at the front costs 30% more than it needs to.
Low density 1960's town planning is the single biggest cause of high house prices. It could be fixed overnight except that the local body politicians are terrified of losing the votes of elderly NIMBYS who don’t want anything to change irrespective of the social and environmental cost.
Friends in Manila own a 50 sq. metre house section . The house is 75 sq. m . on three levels , each of 25 sq. m. .............. Do we really want infill housing for Kiwis , to be so close to our neighbours ?
....... There's little quality of life when the clowns next door operate their 5000 watt boom box until 3 a.m.
Hey Wolly , did you see that Bernard claimed that 1 % of the USA population own 90 % of the assets ! ....... And semblance of facts and accuracy flew out the window there ! ...... Is he running with the Greens this election year ?
[ speaking of flew , gotta fly , off to the hill farms ....... chicken chasing ...... yippppppeeeeeeeee ....... Been teaching the locals Garner Wayne's chicken song ! ]
That's a perfect example - folks who think that anything less than a freestanding house for a nuclear family on a 1000 sqm site is instantly a 3rd world slum and should be banned.
That is exactly the attitude that is driving up our house prices.
A site less than 750sqm in 6A is deemed too small to subdivide (even though it can take over 500sqm of house). There's a lot of options between a 750sqm aite and a 50sqm site. How many vacant sites do you need between you and your neighbour to protect your 'quality of life'? If you want to live in the countryside or a provincial town why don't move there?
Why dont landlords offer 6 months free rent for Queenslanders to move over?
They still wouldnt come, the lack of good paying jobs would be the reason.
With NZ quickly becoming a low wage, low productivity economy things are only going lower-house prices and rents- which are largely (rents) underpinned by welfare anyhow.
Cut the welfare system and anyone unhappy with that can board a boat out of Wellington to somewhere on Australias Western Coastline.
The Answer
We already are a low wage economy! and You cant get the Australian welfare for years. In fact I wouldn't be surprised if the Aussies start coming over here again..Its always been a seesaw relationship....I Met one at the Petrol station the other day that moved over six months back..He said his doe went much further,..and was living well.
In a Civilised country the rent should not exceed a fith of the take home income.I think that the same law here would be a good thing as it would release a lot of cash into the economy and save the taxpayer heaps in subsidising rentals....The downside being a lot of pissed off Landlords..but thats life.Someone is going to be pissed .They could be given tax subsidies,or have the rental puchased by the Gov..The economy would advance fast because of the liquidity and more jobs would eventuate.The Imbalance of overly high rents has NEVER been addresed and it must cause a gross imbalance in domestic trade.
Sounds like a media beat-up to me.
I have rented in the same house in Mt Eden for two years. There are four houses in my street that have had an agents For Sale sign up for the whole two years. Perhaps they want to much for them?
There are another 14 houses that have had a sign up on and off for the past 18 months. Some of this second group have, starting about 7 months ago, followed this cycle.First, the for sale sign disappears. (none of those ugly SOLD! stickers) Next within 2 weeks a For Rent sign appears, lasts about 4 weeks, only to be replaced by a new, and different agency's For Sale sign.
Rinse and Repeat, on a 2 weeks for rent, 4 weeks for sale cycle.
NZ and AU should harmonise their various regulations. The WINZ equivalent is called CenterLink. The WFF equivalent is called FAMILY TAX BENEFIT and is means tested. The IRD equivalent is called ATO or Australian Tax Office. The ATO and Centrelink use computer data-matching. In assessing income, if an FTB recipient has an investment property, then Centrelink disallows or adds-back any interest-paid on mortgages as capital expenditure. The ATO and Centrelink apply completely different rules in assessing income. Strewth. NZers moving to AU have to wait 2 years to get the dole. That QLD guy moves to NZ and gets the dole within 6 months?
So the portfolio has lost half a mill on paper from 5mil down to 4.5mil. That would be about a dozen average houses. 12 houses @ $50 per week is an extra $600 or $30k per year in cashflow - doesn't sound too bad. The asset values are only on paper, the income goes in your bank account!....
And they are going to keep falling in value for years to come Murray as the cost of living continues to rise and our pathetic average incomes in NZ creep up slowly and we get further behind the eight ball as a nation. That is why the smart investors have either sold or are selling their investment properties as they see the writing on the wall. Food,power and other basics will increase in cost and people will have less money for mortgage payments and rent and so housing will continue to depreciate in value except of course for central auckland where there is some work if you want it. Australia is the place to go if you can get good work.There they have saved as a nation and not relied on property for wealth creation as much as we have. 1.3 Trillion in super funds is simply astonishing. What have we got. A government and a population that owes so much money to overseas lenders. And what it bought, buildings,does very little for us as a nation except ensure we send a lot of interest and capital to the overseas lenders who lent it to us in the first place. No wonder Australia is streets ahead of us economcially and we are slipping further and further behind. People will say it is not all about money. But when people are retired they need that money coming in and they deserve a certain standard of living. I would not live in Australia because of the weather extremes alone but I do not have to as I am comfortable here. But I do not blame anyone giving it a go over there as the emphasis on superannuation and the benefits of it has to be admired.
Yep. Sounds good, doesn't it, Murray. And ,yes, it's only 'paper value', until you go the the bank come refinance time, especially if your 'bank' is say, an ex- finance company that is in wind down mode, and they ask for a revaluation to re-instate that 80% LVR that's deteriorated. "That will be fine, Murray. Just pop the extra $500 k into the account so we can get the LVR back to 80% and it's all go". Won't happen? It will... just ask the farmers what the banks are doing in that regard.
Already been happening for the last 3 years, Nick. Happens every recession. Those of us that have been doing it a while knew not to be 80% financed on 2007 valuations.
In your case, I'm usually comparing money in the bank with mortgage free property. There's no point comparing someone with $100k equity and a $400k loan with someone who has $500k in the bank....
It's always the highly leveraged who get left without a chair when the music stops, this time is no different....
Don't bury your head again ostrich.
Some corrections are in order: Unemployment has been 6-6.8% through 2010. GDP for the year to March 2001 was 0.4%, 1997/98 was a recession. Sound like de ja vu?
The market really took off in 03 when the NZD was US60c and petrol prices were up to $1.35 from 85c a couple of years earlier.
I'm not making any predictions - just a suggestion.
Renters should always be afraid. On average history has shown that you'll never come out ahead renting if you can afford to buy.
It's a simple proof:
What's an average net of expenses rent as proportion of the equivalent house? Say 5%PA
What's inflation? Say 2%PA
What's the equivalent risk free return you would need to do better renting than owning? =5%+2% (after tax) = 10%PA gross.
Just where are you expecting to get that kind of return on average over the long term risk-free?
If the rent net of expenses on your house was 8% of its value then you'd need a risk free return of over 14%PA gross. Which is not likely for an investment on average over the lifetime of home ownership.
Only in central Auckland is this rental frenzy happening Chris. And who would want to live there. The rest of the country is in monthly decline in housing values and for some time to come. The cost of living in the area of basics such as food has exploded so people are not going to be suddenly borrowing more even if they want to. And banks are going to be even more careful and allocate more of the applicant's income to food power and other daily costs. Hamilton over a 1000 empty rentals on a daily basis. People are trying to get rid of them so prices are not going to rise there for some time. I admire your tenacity but do not agree with your thoughts about growth in values. Renting does make sense in everywhere else except the hell hole called Auckland central.
Looking with my daughter we came across a lot of rubbish in central Auckland. Pokey, awkward, leaky and grotty places in the lower (student) end of the market. This really is current and future hell hole material. Large buildings with little or no sound insulation, airflow or outlook into another box stack. Some plagued with insects and most with shoddy maintenance and fittings. I pity the poor owners as the low end rents asked less management fees equals no return and lots of deferred costs. Rents cannot rise as overseas students have dried up and locals are not prepared to pay any more.
Most money being made by management company as they levy occupiers for utilities rather than charge actual usage. One does not have to guess that a tidy margin is built into this rort.
But out in the ‘burbs plenty of good flats/townhouses at cheaper rent than last year. And close to train as well.
We looked at a series of flats in the perimeter areas of Eden Tce, Newton etc and high rise in Hobson St and downtown. It certainly is a down a hole geographically and hell in term of building standards. Let foreigners have it I say, they may be more used to the poor living environment, noise, pollution, lack of space, no parks (well none that you would walk in esp after dark), cheap fast food and trinket shops.
No traffic congestion in Mount Albert! You're kidding...Have you ever tried to get past St.Lukes at either peak hour? And it's about to double in size! And which station is it that you use, to avoid that traffict o get to the CBD? Mornigside? So where do you park....
I am with you NA. Sk has lost all credibility now. Most people live in central auckland because they have to not because they want to. The quality of life for most of them is crap and they pay through the nose to live like that. Getting home in seven minutes and playing nine holes of golf before dinner suits me better than living like they do.
I walk a few minutes to baldwin station if u must know.
Chamberlain golf course is around the cnr also.
What are you trying to prove?
Had trouble making it in the big smoke?
I dont care where you live !
The point is - a lot of people have a great lifestyle in the city.
Its not your thing - fair enough!
Ex Agent, would you be prepared to put any cold hard cash where your sadly ill informed mouth is regarding there being over 1000 empty rentals in Hamilton today. There are 777 TradeMe rental listings in total in the whole Hamilton area. Many appear with 2 or 3 different agencies. Many have already been let but the agents let the listing run till it expires. Even more have an "available from" date up to 6 weeks away. I doubt if there are more than 200 places in Hamilton that are sitting vacant waiting for a tenant. A prospective tenant looking for a specific property in a nice Hamilton suburb at the moment would have only a handful to choose from and in lots of suburbs, none at all.
Exactly Vera. After reading Ex Agents comments over the last year or so, I can see why he/she is an Ex Agent... he/she hasn't got a clue.
Most rentals advertised still have tenants who will be moving at some point into another property being advertised. A quick search on TradeMe for properties in Hamilton "available now" shows 49.... 49 in a population of 140,000 should tell you something!
That's actually worse than Auckland which shows 630 "available now" in a population of 1.4million......
Thanks, SK, but I don't think running a blog would be my thing. Too much time in front of a computer tends to make you lose touch with reality, as can be witnessed by many comments here!
Interesting 'Reader Poll' above shows that over 40% of int.co.nz readers would vote for the Greens.... explains a few things about many comments and the audience the site caters to!
And 10% for Winston!
Back in the Real World, the Greens might get 10% and Winston won't get 5.... pleeaaase don't let him get 5.........!
I disagree Murray with your thinking I have not got a clue. Sold a profitable business and investments in 2007/2008 and have watched the market drop since and will continue to sit on the sidelines as it continues to drop for some time to come as New Zealanders come to grips with the current increases in their basis costs of living and deleverage their existing debts.
Anyone who thinks there are currently only 49 empty rentals in Hamilton has no credibility at all. Not all advertise on trade me. I rang my friend in Hamilton this morning and he said there are far more than that on the market. Not as many as before christmas but in some areas of Hamilton there are far more than landlords would want in the current market conditions.
ex agent, I live in Hamilton, my portfolio is in Hamilton. Credibility? Your original claim of "over 1000" empty rentals in Hamilton was completely made up!
I agree they would not all be on TradeMe, but how does your 'friend' know how many more there are?
You would be lucky if there was 1000 places for rent, and you would be lucky if 100 of those were already vacant. That's not many in a population of 140,000 where about 50% of people rent (Hamilton has a higher rental percentage than NZ average).
Sorry Murray it was not made up. He told me that in December after talking to a property manager. Prior to christmas New Plymouth had around 200 empty and it has a population of only 50000. The truth will be between your 49 and his 1000 and I would safely think closer to the 1000 than 49 if New Plymouth is a good guage. Recently there were some statistics out showing empty rentals had doubled in number in recent times. Caused by migration,going home to mummy and daddy and amalgamations I presume. And there is a dearth of good tenants who pay regularly and respect ones investments. One should not just let anyone loose in a rental these days.
So it was a 'friend' who talked to an 'agent' back in December?! Sounds like chinese whispers! I think you'll find the agent would have said there were over 1000 properties for rent, not 1000 'empty' properties!.....
I think you'll find TradeMe would have somewhere between 60% to 95% of listings, and they currently show 750 available in Hamilton, 49 of which are empty......
Bernard, your lack of a statistical background has let you down again. Your data is only for national vacancies off realestate.co.nz (no landlord advertises here because they cannot, hence the data is property managers who are REINZ only) and Trademe, the default site where all landlords and property managers advertise.
Yet you compare the National result of your data with the Auckland Property market - huh???
I collect the same data, but from each and every region and publish it on my site at http://bit.ly/gttcCN
The National data is not too dissimilar from yours I am glad to see, BUT AUCKLAND IS VERY DIFFERENT.
The seasonal nature is very evident, but in Auckland we have come off a 4% vacancy rate 2 years ago to a 3% now at the same time of year.
It is in Wellington where the growth in vacancies occur to make the average sit where you place it, although that is partly due to spamming from a couple of property managers, who place dual or triple ads for every property.
"YA CAN'T LOSE WITH PROPERTY, MAAAAAATE!"
"YA GOTTA BUY NOW, BEFORE IT'S TOO LATE, MAAAAAAATE!!!!!!"
"MAAAAAAAAAAAAAAAAAAAAAAAATE!!!!!!!!!"
SK, it's no longer 2006, and RE parasites such as yourself need to stop living in the past. The bubble has burst and everybody knows it. Everybody with a brain, that is.
I got the low down from a family friend who has a reasonably large commercial and residential portfolio in Hamilton and he got it direct from property managers he deals with. This was in December 2010. Things might have changed a little since then. Not everone lets through Trade me or managers as they do stuff things up quite often. I would have thought a few hundred would be bad enough as it is for a city of that size let alone a 1000. Getting out in 2007/2008 looks better by the day Vera. The good tenants will be going to Australia if they had sense.
I think your 'friend' may have been talking about commercial, there were huge numbers of them built and many still empty - but not so with residential.
"The good tenants will be going to Australia if they had sense" - you mean so that they can pay higher rent, higher house prices, higher tax, higher living costs? Dollar for dollar, NZ is still cheaper to live in, but don't tell the planeloads leaving - as Rob Muldoon once said, Kiwis leaving for Oz raises the IQ of both countries....
Murray we have been educating a lot of our finest minds for years at NZ universities and they then fly off to countries where they are better appreciated and better remunerated and a lot of them never return. What a waste of talent. We then vote in a lot of idiots to run our country as they are the only candidates available because we simply do not pay our MP's enough and therefore we often end up with trade union hacks and failed teachers and lawyers alike. The people who would be our best MP's if they were voted into parliament are simply not interested as it is a brutal occupation and poorly remunerated for the hours they work and are away from home. Just look at how many of them have failed relationships and who get into strife while they are in Wellington. A lot of our best are exported overseas.
I rent a double bedroom place in Central Auckland in a nice area, close to bars and not too noisy (not near main road or loud bars). I pay $360/week rent. Similar (leasehold) apartments here cost $150-$220,000 to buy, and the owner has to pay over $200 in bodycorp/ground rent/rates.
If the landlord had NO other expenses (no insurance, no maintenance, no mortgage) they'd only be getting a rent return of about 4% per annum. I've lived here four years - and I haven't noticed the sales prices go up at all - just wear and tear of the chatels.
Apartments around us are empty for much of the time. I was speaking to someone who works as carpark property manager, and he told me that we must have been the longest staying residents!
I'm more than happy with our place at the moment, but if the landlord so much as nudges the rent we're out of here. It's all managed by Crockers, but I can't see how the owner would make any money - especially with all the useless and redundant (and in some cases devaluing) maintenance/repairs that get done by various con-artist tradesmen!
$360 x 52 weeks = $18,720 per year. That's a 12.5% gross return on $150,000 or an 8.5% gross return on $220,000. Where did the 4% come from?
Auckland apartments are notorious for going through cycles of being severely over-done. They have their own market which is entirely different than a median house. Generally great returns and cashflow if you can get it - crap if you can't, lousy capital gains and often crappily built! Not for me ;)........
Oops, forgot to make it clearer that the ground rent/bodycorp/rates was ~$200 each week. So weekly income would be roughly $150. Then insurance/maintenance/mortgage from that. Occupancy rate obviously varies - but I would guess at less than 90% where we are - although I never know whether the other places are owned or rented.
It's leasehold land (from POAL I think, although not sure).
The only people who should buy these apartments are the multimillionaires who can drop $200,000 and give it to their kids or use it for affairs or something.
Hamilton. We manage our own, so have never bought further afield. We have looked, even in Oz, but most the best returns seemed to be on our doorstep. You also have a lot more insider knowledge in your own patch, where's good, where's bad, where's more popular. Anywhere else, you rely on what other people tell you and it's not always correct!.... ;)
MK - if you are reading from this website, you should know "Greed is good" (according to Gordon's gospel)
Otherwise, Try www.greens.org.nz...
Muppet King, you are very noble and should be admired for that.
But my heart bleeds for those who are constantly whinging and moaning about how disadvantage they are for not able to buy their first home. Our family came to NZ in the early 80s as refugees. Mum and dad worked hard in the factories just enough to feed us all. I worked in 3 small jobs at 14 years old to put myself to secondary school and then university. In 1992 we bought our small two bedrooms home on combined salary of $32,000 – the house was $192,000. We had four jobs between us two to pay the mortgage. Since then we upgraded ourselves many times into bigger and better homes. Now we have a nice house in a good suburb of Auckland and a small mortgage. What peeve me off the most are those who want the biggest and the best right now without getting their A into G. I would say to them is get off their butt start small and work your way up.
We spend quite a bit of time in Singapore and Hong Kong – houses there are many times more expensive than ours. But people there will just get on with it and not moaning/whinging like we do here…
Goodness! Where was that little $195k 2 bedder, C Moa? It appears the median average NZ price was about $110k. Maybe it was closer to $102k ? ( $32k household income @ about 3 times seems about right ) or later in 2002 when it is was up at about $195k, when income/price ratios had blow out to times 6+
Yep - 2 bedroom in Ngaio, Wellington, it has a large section though. Sold that quite a few years - moved to karori and then Kelburn
Shifted to Auckland in 2001, couldn't get a rental at all (we were expected a baby.. May be why but I know how Mary and Joseph felt). So we bought in Ellerslie, then Blockhouse Bay (hated it), moved back to Ellerslie and now Remu... excellent school
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