This blog is intended to provide some comment on current issues, especially those that either include commentary on statistics or those that relate to statistics I gather for my own purposes.  If you are frustrated that I have not updated anything - ask, the site is not busy so I am slack;

Rents Rising quickly

While Eastbourne is not a major part of Wellington, it has been a good indicator of price changes in the past.  No surprise, it is difficult to get tenants if your price is not set in relation to the rest of Wellington, especially Petone and central Wellington (those who are prepared to catch the ferry).

The rise in prices over the last year is similar to one in 2006-2008 but this time probably caused by a shortage of rentals in Wellington - being 45% below normal levels.  The last increase was probably due to catch-up after long stagnation during higher inflation.  Last time there was a lot of movement because there were plenty of rentals on the market (almost 50 at that time), this time bonds are at the lowest ever levels (20), even failing to reach the minimum for publishing one month recently.

Rents rising normally

I watch Eastbourne rental prices closely due to our investment, and recently applicable rents have risen quickly from an average of about $510pw in March to about $550 now.  I wondered if this was abnormal or a sampling issue due to the small size of the suburb.  It turns out to be normal, rents in Wellington have sat still for a few years and are just in catchup mode

Too get the following chart, I downloaded the Geometric mean rents from MBIE (link on the chart).  Then I simply indexed the weekly rents to Feb 2011, because most of my indexes are to that period due to internal migration starting after the earthquake.

The indexes show that all three major regions are following the same course, with Auckland usually leading the way.  Christchurch of course is suffering due to Government intervention with too many properties built.  Wellington is in catchup mode.

Auckland market oversupply

The Auckland private rental market is now well into oversupply with listings well above the normal trend for this time of year.

It is interesting that, along with Christchurch there is no other part of the country in this situation - other cities are exceptionally short of private rental housing - this factor may be a contributor to the reduction of sales in Auckland, i.e. it is harder to find a tenant.

The two chart below are the same data.  The first shows actual listings on Trademe each Monday, the second shows the variation from the last 4 years average at that time.  Only 2009, 2012 an 2013 had more listings for rent in Auckland than the current levels.   Notice that the first one shows the seasonal nature of listings, with more in winter and at the end/beginning of the university year.

Why is our data showing there a surplus when there are people sleeping on the streets?  Simply because this measure is of Private rentals advertised on trademe, and does not include social housing, which of course does not advertise.

The next chart is the same data, but converted to the difference between the actual measure and the previous 4 years at the same time.  i.e. it shows the difference in terms of what would be expected at this time of year.

We do the same for Wellington, which has had a severe shortage of rentals for 2 years and is now showing this with rental prices increasing very fast:

Auckland Inventory new Peak

The Auckland private rental market as recorded on Trademe every Monday, has a fast rising vacancy level, now a few points above the seasonal average for the first time for 4 years.

The market dipped ~10% below seasonal trends almost exactly 1 year ago and at it’s worst was 15% below the seasonal trend in the first half of last year.  

There are now more properties on the market than are required, i.e. supply exceeds demand, not the other way around as claimed by politicians.

This does not look like a good time to invest in Auckland, and that advice is obviously being followed by developers who I understand are not too keen to invest.  Hence the slow build rate.

Data smoothed over 1 month, seasonality averaged over previous 4 years

Wellington rental listings, in contrast are 40% below the seasonal average, still below the record levels of last year.  There is a serious shortage of private homes for rent in Wellington

For open data, here are the non-seasonal charts - Auckland - Wellington

High Rent in Auckland?

Rental shortage Nationwide

The housing market is heading into new territory as the election approaches, with listings throughout  the country dropping to long-term lows, suggesting a shortage of homes for people to move to anywhere in the country.

The black line on the chart below is in uncharted territory due to all major centres showing fewer listings:

  • Auckland heading south little
  • Hamilton & Tauranga staying the same
  • Wellington dropped from 2.5% to 1.5%
  • Christchurch finally reacting to overbuild, dropping from oversupply at almost 4% down to 3%

Does this mean NZ is running out of properties overall?  Most likely

Rental Inventory by region

Sorry I can’t work out how to show the scales, the numbers are in percentages.  The US works on an average of 5%, which could be true for NZ, but Trademe data does not include Housing NZ vacancies, the US does not have an equivalent.

To see how far below typical listings on Trademe that the NZ market is, this chart compares the current listings on 1st May 2017 with the long term average up to May 2015. 

Auckland is sitting about average, Wellington is below average and Christchurch is well above average.

This time the scales are correct!

Mortgage Interest vs Household income

What an interesting chart

This suggests that current homes in Wellington are affordable, but Auckland has gone ballistic on speculation?

What do you think?

Cool Charts

This chart compares the available properties for rent at each noted time with the numbers available on the day of the Christchurch Earthquake.  The shortage in Wellington, Hamilton and Tauranga that had existed prior to the earthquake had been just overcome, but has now grown to extraordinary proportions.

Canterbury construction madness is about to be duplicated in Auckland as retirees desert the city in droves.

I believe construction costs due to new regulations is the primary cause, e.g.:

° Earthquake strengthening

° Wind loading

° Double glazing

° Wall seals creating triple layer requirement

° All round insulation

° Scaffolding requirements

While these are all great ideas, they are not valued by second hand purchasers who compare completed houses with older houses as though they are the same.  Hence prices of second-hand houses are still lower than new, creating a shortage of total houses 

Is Facebook changing renting?

I am a member of our local Community Facebook page and more frequently I am seeing advertisements for local homes available for rent - with no links to a Trademe listing.  While a Trademe listing may be present is this the start of a trend?  Is Trademe in trouble from Facebook?

Our latest inventory by major region on an annual basis shows a consistent downward trend in the number of listings, this could be from many factors though and must not be thought of as a reduction in supply or increase in demand without further information

BTW, the reason this is indexed to the earthquake is that there was a reduction of houses available at that time - over-construction that followed has now led to over-capacity.

Major reasons for the national changes in inventory include:

1.  Demand - Shortage of buildings for rent due to immigration

2.  Supply - Lack of construction in the right places (note Auckland is still increasing in the number of properties listed)

3.  Hidden - Advertising changes away from Trademe (Facebook, Trademe prices)

4.  Supply - Tenants staying longer in current properties (certainly my experience)

5.  Demand - Tenants having more people per property - taking on boarders etc 

6.  Supply - Cost of construction doubled in the last 10 years due to regulatory changes, ceasing build to rent.

7. Supply - Government destruction of housing stock that does not meet their requirements and not rebuilding (due to their regulations increasing costs?)

From the chart:

Christchurch growth in inventory is reducing, but still positive - i.e. too many houses still being built

Auckland is almost at equilibrium.  The construction boom is likely to meet a demand shortage at the prices required to create a rental house.

Wellington, Hamilton and Tauranga all continuing to run out of houses for rent, Tauranga seems to have turned the corner (not visible in this chart) but Wellington and Hamilton are continuing to show a reduction in supply.

© Jonette 2011