Wellington Cycle Ending?

The market cycle in Auckland ended about 2 years ago, but that just seemed to kick off the rest of the country. The Wellington market is finally running out of steam and I suspect the rest of the country is into the last stages of the market before prices stabilise and rentals try to catch up.

Why do I say this?

WellingtonSales listingsare now on the rise after 3 years of a shortage of listings:


Demand for rentalsis now seriously tight:

Rents are not all growing at the same rates, some regions are short of rentals and in some there is developing a glut. A simple comparison of growth rates in rentals across the main regions shows a dramatic increase for Wellington while the growth rates have slumped in Auckland and Otago. There are logical reasons for this - that do not included greedy landlords - mostly demand/supply.


Rents rally for multiple reasons, not only can a shortage drive up rents, but Household income is the main driver of rents. As can be seen below, Wellington is in catchup mode, not only with a shortage of rentals but also from a low of 18% of incomes to the typical historic upper level of 20% of incomes, with a bit of overshoot. I personally expect rents to come back a bit in Wellington as apartment blocks open shortly.

However with interest rates dropping, competition for the housing dollar at the top end may now come from lower priced and more affordable house purchases. I have not thought of a way to show data for this possibility, unless you take the upward trend in the chart below from 2002 to 2008, when interest rates were increasing.


Contrast Auckland which was high during a shortage in 2012-2015, but now has more rentals available driving the rent as a proportion of income from 25% down to 22%.

Please comment below, I have avoided too muchcommenton this analysis and would appreciate feedback.


Jonette 2011