Boom and bust?

The building boom currently underway is clearly having a serious impact on supply, so much so that cities like Hamilton and Auckland are showing significant gap changes between supply and demand:

  • Auckland supply is now greater than at any time in the last five years, compared to July this year, when supply dipped well below last year.
  • Hamilton was at a all-time low in March and now has more supply than 2017 or 2018

However, supply is not equal to demand in many of our biggest cities as years of under-investment has seen a shortage of properties driving rental and sales prices up. The current boom is having small impacts so far.

Private Rental Listings shows the number of listings I expect if 2.5% of private rentals are listed at any one time (Inventory). Plus the over-supply(+ve Surplus) or undersupply (-ve Surplus)


The NZ Regions Rental Inventory chart shows supply in relation to an expected balance of 2.5-3% of existing rental homes being up for rent at any one time. While Hamilton is increasingsupply there is still a lot of demand to use up, 1.8% of properties being advertised is well below the 2.5% I would expect for balance, ie where supply meets all demand. Auckland is just keeping up with population increase, remaining just below 3% of active bonds (existing rentals)

Wellington and Taurangacontinue to fail to meet demand despite an incredible construction effort. There is still plenty of room for more homes, I estimate a shortage of about 450 public rental homes in Wellington and 250 for both Tauranga and Hamilton.

Note that Housing New Zealand arecontinuing to build at subsidised housing at a frantic rate, completing about 2,500 homes since the change of government and continuing at pace - here is a local Naenae development with 37 homes:

IMG 0294 copy


Government interference in the construction industry (or any industry for that matter) tends to suffer from over-hyped expectations. These expectations create a boom with an inevitable bust - just look at Christchurch in the chart above, 2016-17 was the result of an overbuild for a market that was not there anymore. I expect the same will occur for the rest of the country over the next couple of years.

Edited addition:

I was thinking about the growth rate of rentals in each region so decided to plot what that looked like to see how big the problem is after Judith Collins apparently said that landlords are leaving the industry.

She is right:


Clearly the growth rate of new rentals has kept up with growth in demand, however with growth rates now below 1% for BoP and the average for NZ at 1.5% we have a looming shortage of properties. The good news is that Wellington building boom is helping to catch up. The bad news is that despite the building boom in Auckland we are heading very low, although there is plenty of room to move since Auckland this week hit an all-time seasonal high for advertised rentals.



Jonette 2011