News

Will Landlords Sell? 

A recent report reveals that a significant number of landlords in New Zealand are considering selling their properties in the next year. While 30% expressed interest, experts urge caution, as previous negative announcements didn't lead to mass sell-offs. The upcoming election outcome and positive market indicators, such as stabilising interest rates and rising house prices, may influence landlords' decisions. Recent sales figures don’t suggest a significant increase in landlords selling their properties, and many factors need to be considered before making a decision, such as market conditions and rental demand. Despite the cautiousness, landlords remain confident in the long-term prospects of the property market.

Economic Outlook and Challenges Ahead 

David Hargreaves shares his insights on the economy until the end of 2023. He expresses concern about the negative GDP figures for the first quarter, putting the country in a technical recession. Hargreaves predicts that the economic downturn narrative will continue in the second half of the year and possibly into 2024. He worries that the focus on the recession could lead to a downward spiral as people become cautious and reduce spending, affecting businesses and employment. The upcoming June GDP figures, released during the election campaign, may contribute to a darkening mood among the population and impact the election outcome.

Hargreaves also highlights the importance of the labour market and its effect on consumer spending. While inflation may start to fall, he believes it could persist for years, keeping interest rates elevated. The housing market is another crucial factor, with house prices still high despite a recent decline. Hargreaves predicts that house prices may start rising again but warns of potential risks such as further interest rate hikes and rising unemployment. Overall, he anticipates a challenging second half of the year, heavily influenced by the labour market and the election outcome, with hopes for the best but fears for the worst.

ACT's Critique on Rental Property Policies 

Brooke van Velden from ACT New Zealand criticises the Labour government's approach, claiming that it negatively affects renters. She highlights the record-high median weekly rental prices of $610 in May and the increasing number of rental property investors considering selling (reaching a net 11% in the coming year) as evidence of Labour's failures. Van Velden criticises Labour's approach as an "eat the rich" mentality and accuses them of ignoring economic principles such as the inverse relationship between taxation and supply. ACT's proposed policies focus on reducing government spending, implementing tax cuts, and promoting the construction of quality and affordable housing. They argue that sound economic management and a fair tax system are crucial for New Zealand's prosperity.

Rising Rental Prices Nationwide 

Despite dropping house prices and rising interest rates, rental prices in New Zealand continue to rise. Infometrics principal economist Brad Olsen notes that rental price inflation has been sustained, with a 4% increase in rental prices over the past year. This pricing pressure is seen nationwide, not just in big cities, as demand for rental properties has increased across the country. Concerns have been raised about landlords leaving the sector due to economic pressures. The Front Page podcast episode 'How are economic conditions impacting renters?' discusses various issues surrounding the rental market, including the enforcement of rental rules, politicians' efforts to provide decent homes, and the decline in homeownership rates.

Auckland rents soar after weather events hit supply: Trade Me 

Auckland has become the most expensive region for rentals in New Zealand, with the median weekly asking price reaching $660 in May, according to Trade Me Property. Rent prices in the region have increased by 10% ($60 per week) compared to May of the previous year, while the supply of rentals advertised on the website has decreased by 35% annually, while demand has risen by 55%. This shortage of rental properties is not limited to Auckland alone, as many regions in New Zealand are facing a lack of available rentals. Factors like the damage caused by floods and Cyclone Gabrielle have contributed to the supply issues and subsequent rise in rents. Nationwide, the median weekly asking rent reached a record high of $610 in May, with a 6.1% increase compared to the previous year. It's important to note that these figures represent the asking rent prices, and the actual rent paid by tenants may vary.

Compensation for Uninhabitable Conditions 

In a recent Tenancy Tribunal ruling, an Auckland landlord was ordered to compensate tenants after claiming a flood-damaged property was habitable. The tribunal reduced the rent by 10% until the end of the tenancy, as the downstairs area remained uninhabitable. The landlord was also found guilty of breaching tenancy law by failing to install smoke alarms and provide heating. In another case, tenants were allowed to terminate their tenancy due to flooding that made the property unfit to live in. The council's red or yellow-stickering process was deemed irrelevant in assessing habitability.

Falling house prices and rising rents have pushed up yields for investors - but they're still woefully inadequate

According to interest.co.nz, the gross rental yields for residential property investors in New Zealand have increased between the first quarter of 2022 and the first quarter of 2023. This is due to falling house prices and rising rents, making residential property investment relatively more attractive. However, despite the improvement, the yields are still considered inadequate, and investors may struggle to find properties that provide a reasonable income stream. The low yields mean that even a short period of vacancy or unexpected expenses could lead to negative cash flow for investors. As a result, the number of mortgage approvals for residential property investors has declined significantly, and the prospects for generating income from rental properties appear limited in the current market conditions.

Property sales finally stop falling

According to CoreLogic's latest Chart Pack, property sales in May 2023 increased by 7.5% compared to the previous year, marking the first annual increase since May 2021. While it may be premature to declare a new trend, further modest sales increases throughout the year wouldn't be surprising. However, average property values dropped by 0.7% in May and have declined by 2.3% over the past three months and 11.6% from their peak. The upper quartile has experienced the most significant downturn, with values down 14% from the peak. Despite this, the tightening stock of listings on the market suggests a potential floor for house prices soon.

That wraps up our Fortnightly Rental Market and Investment News Roundup. Don't miss out on staying informed and ahead of the game. Subscribe to our mailing list today to receive these updates, and other valuable content directly to your inbox.