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;

Opportunity in Wellington (again)

Building consents by Region

In my last post I compared building consents with a past average. I thought that comparison could be improved so here is one based on the number of households in the 2013 census. ie for most regions, there were less than 1.5% consents per household. That was clearly low compared to the last 20 years which seems to sit about 2% for most regions - recall that in 2000 I am comparing to households in 2013, so this number is slightly depressed, making the 2013 number look even smaller. I was able to do this for all of NZ, so that also gave me a usefull total NZ line.

BTW, I had to remove Queenstown from this chart to bring the scale down - it sits at close to 10% and follows an independent pattern.

Wellington is different

The standout is still Wellington. Recall that this is consents, so Tauranga and Hamilton are showing a recent large increase, but the construction has not yet finished so the increase in supply to match demand has not yet happened. Christchurch on the other hand is winding down and so are prices as supply starts exceeding demand.

Wellington Urban Areas

This led me to wonder where in Wellington, since I am local and could expect to know about any changes - and am only aware of increasing apartments in Petone (part of Lower Hutt). Apartment building in Wellington appears to be running at about the same level as in the past and the chart supports this.

Wellington Urban AreasThe chart below shows the city compared with urban areas. - there is no outstanding area, lack of growth seems to be consistent across the board. However, there is a sudden change in Lower Hutt, but that is after a long period of almost no growth - a feature locals are very aware of due to a council intent on doing nothing to save money.

These charts strongly suggest, along with the charts on rental listings here, that there is an excellent opportunity for development in Wellington right now

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Wellington Building Boom Yet to Start

Building consents published by MBIE show some interesting numbers. It would appear to be a great time to invest in Wellington.

The post earthquake Christchurch building boom is obvious, and is well over the top now but remains well above the building levels prior to the earthquake - despite rentals falling!

Hamilton & Tauranga are well into a building boom, and considering the real shortage of rental properties in these areas it is about time, but is the boom overblown? Actual housing coming on to the market could change the situation dramatically in the near future

Auckland on the other hand is just ticking along, pretty much matching construction in the past, hinting that the market is not calling for more private housing. It’s not that clear the the index base is good for Auckland, maybe it needed to be higher. Maybe the Housing Corporation will be able to build enough low rent housing in this lull.

Wellington on the other hand is at least as short of private housing as Hamilton and Tauranga, but consents are only 90% of the long term average prior to 2007. That suggests to me that the market is not being met with new housing.

Why use 2000-2007? I don’t have enough data yet for a better index. Once the 2018 census data comes out we will be able to see where all these immigrants have gone, but I suspect they have followed the available accomodation, the work may also follow them. I will re-index then to find out where the Auckland average should be.

Rental Yields

An article on NBR that claimed the current simple yield has dropped to 3.5% caught my interest. The writer said that he read the figure from MBIE in the past but no better reference. So I investigated

He was right, but the devil is in the detail. I pulled data from the five main cities and there is a clear difference between the northern cities and southern. in the north the current rate is 3 to 3.5%, but Wellington and Christchurch are sitting at 4.1%. The total is a weighted average of these cities.

Wellington has been different in the past, but the beginning of the last boom resulted in a bit of a merger. Tauranga has usually had a very low yield, but is about the same as Hamilton now. Since the earthquake property prices appear to have impacted yields in opposite directions for Auckland and Christchurch.

Comments below please

A Strange Kink

Updating the monthly stats hereI found a common Kink in the data starting last week. I am not sure what caused this but it is very evident in Wellington, where I know many properties never made it to Trademe due to “listings” on Facebook. We tried that and it works, sort of, if the demand is high.

The chart below shows the point on a national scale, listings did not reach the highs of the peak last late January, then suddenly in March they are matching. I suspect demand/supply is the same as last year, i.e. suppliers advantage in WN, HN and TG, while AK and CH are about even.

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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 thismeasure 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 pointsabove 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 nowmore 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?

Jonette 2011