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CGT & Landlords Selling?

Discover how much Active Bonds are growing and what influences the level of supply

National

Charting the YoY growth in number of active bonds from the published data of MBIE, it is obvious that apart from some short periods of dips in the past, the growth rate is a relatively constant rate of ~12,000pa. All the previous dips in supply have been during public discussions about CGT.

At no stage has the growth become a loss, ie dipped below zero. The worst period was in August 2013 when only 724 active bonds were added to the national rental pool.


Regions not impacted by CGT

The discussions about CGT do not appear to have had any influence in Auckland, Waikato and Canterbury. It is not obvious why, but there is a large dip in Auckland in late 2011, the only discussion at that time I can see on Landlords.co.nzis about dwelling purchase price growth starting again, I suspect this may be the reason but do not know.

Notice Auckland stock increases about 4000pa, with a short oversupply in 2008-2010, followed by a severe dip 2012 to 2014, then another rise in 2014-2018. A linear trend model shows the Auckland line being almost flat about 4500pa, rising from 4250 to 4750 over the 20 years, ie with 150,000 rentals in Auckland, that is about 3%.


CGT Sensitive Regions

Wellington and Bay of Plenty appear to be very sensitive to public discussions about CGT, because both regions slowed in growth during these discussions, even to the point where there is a clear loss of rental homes during short periods:

  • Wellington in 2007 and 2017
  • Bay of Plenty in 2013 and 2016

Has Wellington bounced back in the latest data as people believe CGT looks less likely to fly?

However if Wellington had continued to grow at 1400pa, there would be more than 4000 higher today - possibly hinting at why there is a shortage of about 800 rental properties now showing in weekly stats?


There are many calling out CGT for potentially causing a loss of rental homes on the market, this data suggests that the market is sensitive to discussion in some regions, but the lack of sensitivity in other regions suggests it will just not happen.

Unfortunately debate about CGT is usually coupled with debate about housing health regulations, which may also be a factor in reduced additions to the rental housing stock.

Overall there has not been a reduction in rental stock, however a reduction in rental stock growth in Wellington and Bay of Plenty has definitely led to increases in prices. Current rental listings (inventory of vacant houses) inWellington and Bay of Plentyis severe.


Wellington Rents, the real story

Wellington rents continue to be well below those of Auckland;

January 2019:

  • Wellington $457 pw (despite the seasonal high)
  • Auckland $525 pw - Auckland is not seasonal

Rents as a Proportion of Household incomes

Auckland rents however, are being held back relative to incomes due to oversupply. Wellington Rent/HH Income has a long way to go to catch up with the peak in 2010, but have started to rise after a 5 year period of relatively stagnant rental prices, now that there is a severe shortage of rental housing. (for 2019 income, I have estimated to include the increased Accomodation Supplement - it has the same value in 2019for both Auckland and Wellington, but actual rents are much higher in Auckland)

The long term severe shortage of properties in Tauranga is showing with rents a point above the long term trend of about 23% of household incomes, having recovered from 26% in 2017.

Note, recent publicity about rent prices in Wellington exceeding Auckland is simply fake. The survey was from advertised vacancies, not actual rents. Auckland’s surplus means that lower priced dwellings are included, but a shortage in Wellington means most lower priced dwellings are taken off the market quickly or are advertised on Facebook during January (seen last year), hence inflating the average price of advertised properties. MBIE publishes actual bond prices on a monthly basis, so this data is based on the actual prices agreed by tenants and landlords, with some adjustments if some higher or lower suburbs have more or fewer recently rented properties.

Jonette 2011