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;

Wellington Market Racing Ahead

I decided that my recording of listings only was potentially misleading if the turnover accelerated to a point that my monthly listings was being updated faster than monthly.  I suspected this was so recently when Trademe stated they had fewer listings this year than last.  So I sought some data on the number of properties let each month and of course MBIE publishes bonds data back to 1993.

However there are two caveats:

  1. Not all bonds are registered with MBIE, but lets assume most are.
  2. Not all properties are advertised on Trademe, but after trialling advertising on Facebook last month, I expect most to be.

So the difference between these two numbers will represent those properties advertised, and bond registered within a month and so not adding to my level of inventory - i.e. a turnover measurement.  I calculate the ration of the two and add that line as an Index (in Black) to show the relative turnover - notice where bonds=listings it shows 1000 - i.e. 100%, Datawrapper does not let me have two axes.

This shows up quite well and fits the news of two things, the difficulty of getting a rental in Wellington AND Trademe’s comments on demand, which I initially thought were spurious, but they measure turnover direct, not current listings like me.  i.e. their numbers are like the MBIE Bonds, but equally do not measure the left over inventory.

here is the chart with Bonds & Listings averaged over 12 months and moved forward by 6 months to correspond to actual timings:

The thick black line is running at 2000, i.e. twice the size of the listings, so that suggests there are twice as many listed and rented within the month as listed at any time.  This speed has been consistent since mid 2016!

Anecdotally, this is exactly what is happening.  Our latest rental not only included an excellent range of tenants in the first week, but also a long list of people pleading special cases to get a tenancy.  This is on properties well into the suburbs that back in 2010 to 2014 took up to 5 weeks to tenant.

Please leave comments, that may help me think about more options for research

Updated to clarify the chart using more moving averaging - i.e. getting rid of monthly variations

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 

© Jonette 2011