Housing rents stuck in the mud

Property

Rental growth slows - Auckland rents up just 2.2% on year ago

15th Dec 14, 9:58am by Greg Ninness

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The pressure appears to be coming off housing rents just in time for Christmas.

The national median asking rent for homes listed for rent on Trade Me Property has been unchanged for the last four months at $400 a week.

"There's less price pressure on tenants and a healthy supply of properties for rent in many areas," Trade Me's head of property Nigel Jeffries said.

The rental sector was quietening even as asking prices of properties being listed for sale was starting to increase after their winter slump, he said.

Although rents were higher than a year ago, the year on year difference had declined from a peak of more than 8% in September to just over 5% in November.

In Auckland, the country's busiest rental market by far, asking rents in November were only 2.2% higher than they were in November last year.

In Canterbury, where rental accommodation has also been under pressure, asking rents were up 8.4% compared with last November.

In Wellington they were up 2.7% and in Otago they declined by 1.6%.

In Auckland the median asking rent in November was $460 a week, in Wellington it was $380 and in Christchurch it was $450.

Here's Trade Me Property's full report on the rental market.

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45 Comments

by tito | 15th Dec 14, 10:11am 1418591487

I dont it get. Why are rents so subdued in Auckland, when house prices are going through the roof. Ideas anyone?

by Zoltuger | 15th Dec 14, 10:20am 1418592004

It's bizzare... it's as if investors aren't investing in property for rental yield.

by Basel Brush III | 15th Dec 14, 10:24am 1418592268

A reflection of the TRUE demand?

Is there really such a big shortage of accommodation in Auckland or is it just a misconceived value by investors?

Perhaps overseas meddling based on their returns in their domestic markets is overflowing here.

Watch for a swift and messy exit if sentiment changes.

by sadr001 | 15th Dec 14, 12:06pm 1418598364

A new investor starting out has to borrow at about 5% and will need yields of about 6% to break even / turn even a small profit anually.

More seasoned investors who have developed income bases overseas can borrow as low as 2% and only need 2.5% to break even / turn a profit. (borrowing overseas is unadvisable practice unless you can hedge because of the forex risk that you are exposing yourself to.)

It is my hypothesis that rental yields between 2.5% & 6% in part reflect the cost of borrowing for the investor. The other big part is of course the prospect of capital gains.

by muntijaqi | 15th Dec 14, 10:22am 1418592145

Because there is not the lack of supply we're hearing about as an excuse for not taking action on a huge speculative bubble who is making a few people quite rich and encouraging others to "do the same".

If rent prices don't go up is because the demand does not go up.

Either most of the people still take on mortgages to own an overpriced asset, or somebody is not telling all the truth about the real situation.

As rent prices are more attached to salaries I assume salaries are only increasing around 2% a year.

But as long as people still prefer to buy than to rent despite the high prices, the market will remain irrational.

by rastus1 | 15th Dec 14, 11:00am 1418594415

by rastus1 | 15th Dec 14, 11:01am 1418594501

..why are subdued? ...rentals are occupied by tenants who live in the real world of stagnant wages. Landlords live in the world of cheap credit, tax breaks, leverage and so on.

by Jamin | 15th Dec 14, 10:30am 1418592644

Many investors = lots of property avalible for rent..... lower rents.

It's true what Ollie Newland says. If you crack down on investors then there will be less properties avalible for rent, so rental costs increase.

by Basel Brush III | 15th Dec 14, 10:37am 1418593020

Ipso facto the renters will then be able to afford to buy the property which will then reduce the rental demand.

Where is the problem?

by Jamin | 15th Dec 14, 11:07am 1418594853

Yip completely true. There needs to be a balance between invsetor / buyers / renters. Currently we are weighted with too many investors. LVR's not helping.

by DFTBA | 15th Dec 14, 12:51pm 1418601076

Really? How many families now renting can you see being able to afford to buy a house of 700K?

by Basel Brush III | 15th Dec 14, 1:36pm 1418603807

Have you missed the point?

Property is just as price sensitive as any asset. The only difference is the stickyness resulting from financing, investor sentiment and agent commission (read cost of selling).

Get a few sales at a lower value and the sticky ones become outliers medium term.

Get a lot of sales and it will become a cascade and then a flood.

by DFTBA | 15th Dec 14, 1:55pm 1418604937

Yeah nh, not buying it. All this depends on the "government" cracking down on investors. I can't see this happening, to be honest.

And even if it did, it would give so much warning, that the market won't get flooded as there will be no rush to get rid ones 'portfolio', or there will be so many loopholes that the diehards will be able to shift things around.

by PeterPen | 15th Dec 14, 11:05am 1418594718

A meagre 4% rental yield in AKL may still look good for investors who get close to 0% on savings throughout most of the developed world. And the Asians dont care anyways, because it has more to do with getting money away from the risks of the corrupt legal system back home than turning a yield.

And for NZ investors/speculators the interest rates are also near record lows so that capital gains become the focus in the buying frenzy.

Just another sign of the massive distortions created by central bank money printing. They are criminals, really.

On the other hand, I know of families in AKL who share houses now to be able to pay the rent. I mean two families living in a place that was previously regarded a one family home.

In some way I look forward to the final crash of our entire sick economic and financial system. I liked NZ better when buying a house was easy for young people and they could focus on what matters in life, and not the bloody "markets".

by Your Landlord | 15th Dec 14, 11:31am 1418596264

Yet more proof of the great service provided to people by New Zealand's landlords.

They are providing accomodation to people at the lowest possible cost, reflected in the low yields on property. Tenants get to keep a lot more money in their pockets because of the efficiencies of landlords.

Yes, it is wonderful how efficient landlords are at the job they do. Interest.co.nz readers should be impressed.

by Basel Brush III | 15th Dec 14, 11:42am 1418596937

Dream on.

by Crazy Horse | 15th Dec 14, 12:34pm 1418600069

YL......just shows the "disconnect" between the Auckland sales market (an international market) and the rental market (a local market)......while proving people are buying property for capital gains or a place to park their "funny munny" .....

by cowboy | 15th Dec 14, 2:58pm 1418608721

except the yields are low because the prices are up. Not because of passing on savings to tenants.

(much of the time. tenants are close to what market could bear anyway)

by raegun | 15th Dec 14, 4:18pm 1418613509

Yeah right, if landlords were not a factor then prices would reflect better what people could pay to own their own homes, demonstrating what a disservice they have done to the housing market.

by KH | 15th Dec 14, 12:36pm 1418600215

There is clearly no shortage or excess demand. But price of houses continues to balloon.

When the bubble bursts there will be a big "POP"

by DFTBA | 15th Dec 14, 2:02pm 1418605331

Where I live there is a severe shortage and low income peope are being driven out of the community.

It's not 'investors' per sé that are to blame, it's Aucklanders buying up properties for holiday homes, and not renting them out in the off season.

To keep small communities alive, I think we should be looking at the percentage of houses within a community that can be sold to be held as holiday homes.

I mean, we've got streets where there are maybe 2 or 3 permanent residents, out of 50 or so houses....how insane is that?

by cowboy | 15th Dec 14, 2:56pm 1418608607

well people are obviously selling to these NZers

by DFTBA | 15th Dec 14, 3:04pm 1418609065

...meaning?

by Value Added | 15th Dec 14, 4:44pm 1418615090

In all honesty, if the New Zealand government won't even establish a simple CGT or introduce restrictions on non-residents purchasing property here then you're absolutely dreaming.

Sorry to hear about your community being affected but money rules in this country.

by Kumbel | 15th Dec 14, 3:41pm 1418611310

Yep that's what a market looks like when supply meets demand.

So let's have some fun with numbers. Bernard told us a couple of weeks ago that the AKL market has experienced 35% price rises in two years or 17.5% p.a. It looks to me as though 15% is the casino bet and 2.5% would have happened in a balanced market.

Even 15% p.a cumulative price rises means a doubling of nominal prices every five years.

Auckland Council are trying to put together plans for the next 30 odd years. At the end of that time - if the current housing market continues as is - that ex-state house in Grey Lynn that recently sold for $1.15m will be on the market for close to $150m.

Of course something is going to give its just a question of whether the bubble slowly loses air or pops. This is a good read - written for Australia but applicable here too - that comes to the conclusion that the political and financial pressures to not touch the bubble means the POP is way more likely.

Fun times ahead.

by Kakapo | 15th Dec 14, 12:42pm 1418600524

Gosh, it's almost as if demand for houses as speculative tokens and demand for houses as accommodation are entirely different things. Staggering.

by steven | 15th Dec 14, 3:44pm 1418611475

yes indeed.

by Value Added | 15th Dec 14, 12:44pm 1418600649

No surprises there then. NZ has the second highest house price to rent ratio behind Canada. That's proof there's no actual shortage of places for people to live, just a shortage of places for people to invest.

Because NZ is the supermarket of houses and supplier of tax free capital gain for the world.

And that's a recipe for sustainable and productive growth right...?

by Value Added | 15th Dec 14, 12:44pm 1418600652

Because NZ is the supermarket of houses and supplier of tax free capital gain for the world.

And that's a recipe for sustainable and productive growth right...?

by Simon | 15th Dec 14, 1:22pm 1418602974

Because the supply demand imbalance that is causing the price rises relates to number listings Vs. number of active buyers; nothing to do with actual number of physical houses (the 'shortage' that most refer to and use as a fundamental justification for the price rises).

Its going to get very messy up those ways if people cant get their heads around this simple/small but very important difference. If actual supply of physical houses/land gets opened full bore at the same time sentiment changes (so number of active buyers halved or falls even further), then you'll see price falls. Nothing to worry most people and a good thing for FHBs but its the late comers who read the Matthew Galligan peices and stretch themselves to buy that will get burnt.

by fat pat | 15th Dec 14, 1:49pm 1418604565

I manage a 3 beedroom place near the beach on Kohimarama Road. The house owner happens to also be my landlord. Despite the rent being the same $550 p/w that it's been for the last 4 years, I found it surprisingly difficult to rent out (with no letting fee). It took over 6 weeks to find a suitable tenant. The very few DINKS that did sniff around basically turned their noses up at this house which has panoramic views of Rangitoto and Brown island! I guess if you want high quality DINK tenants to pay $550 per week, then you’re going to need to spend 1.8 – 2 million at auction.

by BigDaddy | 15th Dec 14, 3:46pm 1418611601

Olly Newland has been right all along as usual.

The only reason why rents remain cheap is because there is no housing shortage.

There are over 4000 "cheap" houses for sale on Trademe under $600K right now.

Read:

http://www.interest.co.nz/property/70022/olly-newland-gives-seven-reaso…-

The so called "Housing Crisis" is a mere political and media beat up and that's all.

by Kumbel | 15th Dec 14, 4:09pm 1418612978

Don't tell Nick Smith, winON, he'll be gutted.

by raegun | 15th Dec 14, 4:12pm 1418613152

$600,000 cheap?????????? What on earth have you been smoking? I did a search using $400,000 turned up just over 2100 but on closer examination of the first page nearly all were apartments, the rest were being marketed without a price, listings up to $450,00 appeared and one or two were just sections.

If we have reached a point where $600,000 is considered cheap then I am afraid we are completely off our collective rockers.

by Stephen Hulme | 15th Dec 14, 4:26pm 1418614008

If we have reached a point where $600,000 is considered cheap then I am afraid we are completely off our collective rockers.

Cripes, the NZDMO thinks it can keep the retail riff-raff out of government debt tenders by setting minimum $1 million bid limits - not any more apparently - before you know it half of Auckland will be trying to clean up on higher present values for coupon and principal cash flows - there were certain winners for those long this load of shananigans and it's NZ counterpart in recent months.

by iconoclast | 15th Dec 14, 4:41pm 1418614886

Don't worry about the wailing banshees and collective amnesiacs Big Man

You've been telling them for the last 6 years - I've even agreed with you on occasion

It will continue while the current open immigration policy settings remain in place

by Value Added | 15th Dec 14, 4:48pm 1418615327

$600k is cheap to you is it?

More proof of New Zealand's widening inequality...

by tagrossbilly | 15th Dec 14, 5:34pm 1418618040

Gross personal insult deleted. That type of rubbish will not be tolerated. -Ed.

by Kumbel | 15th Dec 14, 6:32pm 1418621535

Anyone who goes by the moniker, Thank You, Gross Billy, hardly has a leg to stand on.

Whatever we think of Olly's shennanigans let's play the ball not the man.

raegun found it pathetically easy to shoot down BigDaddy's (who is not Olly Newland) argument. Let's play it that way. The commentariat on this site bring a whole load of extra info to the table that you will never find in the MSM. Let's not spoil that.

by raegun | 15th Dec 14, 6:52pm 1418622751

Let's play the ball not the man, is that a bit like maybe not saying something like someone would be, oh, I don't know, maybe in favour of euthanasing "idiots"

If Big Daddy wants to put his head above the parapet with comments like his, then he can expect to get it shot off, in fact, I expect that he would be an tad disappointed had he not

by Kumbel | 15th Dec 14, 7:16pm 1418624199

Touche :-)

I still prefer the quality arguments not calling someone a pederast. You did a great job skewering BD's comment. And you didn't have to call him names to do that.

by raegun | 16th Dec 14, 7:49am 1418669359

If you are referring to the comment about Big Daddy's name, it conjoured up an image more of a guy in blue bib overalls, tattered old hat, corncob pipe in the mouth, shotgun in hand, coon hound at his side about to draw a bead on his daughter's suitor

by Kumbel | 16th Dec 14, 8:35am 1418672111

A small touch of Burl Ives perhaps?

by iconoclast | 15th Dec 14, 7:45pm 1418625919

Kumbel, Raegun, ALL

As one watches this passing parade of well meaning individual interpretations of what is a compound problem, and if you ponder on it for a while you will begin to realise it is being done in a vacuum, in the absence of meaningful data. One just doesnt know. Yet that very absence is what enables this comic opera to sustain itself. Remember Bill English and John Key and the people that rule your lives tell you that it isnt happening, it isn't important.

So why doesn't it go away? Why doesn't it simply fade away into the mists of time, within 24 hours as most things do?. It keeps on simmering away. If you "listen to the chatter" you know it's real. It is happening.

By way of contrast, Marcus Lush on his morning radio program, talking with Bernard, about retail and xmas, and online shopping and bricks and mortar, came up with a real beaut

Marcus ordered a pair of (chinese made) sandals from an online shop located in Manchester England. With his order docket in hand he was able to track in real-time, the passage of those sandals all the way from Manchester, to various depots in England, over to another depot or two in Europe via air to Singapore, to Australia, to Auckland. At the moment they are sitting in an Auckland warehouse awaiting dispatch to Invercargill and on to Bluff. He knows exactly where they are.

Amazing technology. All for a pair of sandals. Think how many packages get despatched in a year.

Yet we can't track 100,000 properties annually changing hands, where its ownership is transferring to, who's got it, is it residential or rental, or bach etc etc.

Gotta listen to it. Good giggle

http://www.radiolive.co.nz/AUDIO-Bernard-Hickey---RadioLIVEs-Finance-Ma…

by BigDaddy | 15th Dec 14, 7:36pm 1418625403

Olly Newland under quoted the average price for Auckland

Auckland North – Albany   $800,000

Auckland North – Birkenhead   $706,000

Auckland Central – Eastern Suburbs   $1,010,000

Auckland Central City   $378,000

Auckland Central – Mt Eden / Epsom    $914,000

Auckland West – Henderson Area   $478,000

Auckland South – Papatoetoe   $444,000

All of Auckland Area   $590,000

"According to REINZ data, house prices in Auckland Region set a median price of $625,000 in May 2014 and the Auckland housing market remains one of the the strongest in New Zealand. REINZ Chief Executive Helen O’Sullivan commented that, “Vendors are starting to become more realistic on price expectations, although the number of listings continues to be an issue across the region.”

link:

http://www.enz.org/house-prices-auckland.html

That was May 2014 - even higher now for Auckland @$670,000.