Scouting the Market: Your Fortnightly Rental Market and Investment News Roundup | August 11th, 2023
11 August 2023

Scouting the Market: Your Fortnightly Rental Market and Investment News Roundup | August 11th, 2023

Welcome to our Fortnightly Rental Market and Property Investment News Roundup for August 11th, 2023! We've gathered a number of the latest key updates to keep you informed about New Zealand’s ever-evolving rental market and property investment landscape. From shifting housing trends to policy updates, we've got you covered.

New Zealand Property Downturn Nearing Conclusion as House Prices Rebound in Key Locations - CoreLogic

The New Zealand housing market is signalling a potential exit from the downturn phase, with certain regions experiencing stabilisation and even growth in property prices. The CoreLogic House Price Index (HPI) saw a 0.4% decline in July, the smallest drop in six months. Auckland and Wellington's markets are showing promising signs, with values either holding steady or rising in several sub-markets. Factors such as mortgage rate adjustments, rule changes, robust employment, and migration flows are contributing to this shift. As sales volume increases and competitive pressures rise, the market seems poised for a gradual recovery, indicating a transition to the next phase of the cycle.

The State of the Housing Market: Mid-Year Update

Quantitative insights provide a snapshot of New Zealand's housing market. Despite a period of falling prices, the national median house price in June stood at $780,000, remaining unchanged for three consecutive months. This is compared to a 17.7% price drop since the peak in November 2021. The house price index noted a 0.4% nationwide increase in June, the first substantial rise since November 2021. While property sales are on the rise, factors like longer days to sell and fewer new listings present additional considerations.

Swarbrick's New Bill to 'Weed Out' Healthy Homes 'Cowboys' 

Green Party MP Chlöe Swarbrick has introduced a member's bill aimed at ensuring adherence to Healthy Homes standards, addressing concerns that the current standards are predominantly voluntary for landlords. The proposed Residential Tenancies (Healthy Homes Certification Scheme) Amendment Bill seeks mandatory certification for landlords, requiring proof at the start of each tenancy and renewal every four years. While advocates highlight the bill's potential to ensure healthy living conditions, critics argue about potential bureaucracy and increased costs.

Willie Jackson Has Lost the Plot on Housing According to the National Party

Associate Housing Minister Willie Jackson's assertion about the positive state of housing under the Labour Government has triggered criticism from the National Party's Chris Bishop. The housing spokesperson contends that Labour's housing record is marked by challenges, including rising rents and increased social housing waitlists. Labour's initiatives like KiwiBuild face criticism, with the National Party positioning itself as having a comprehensive plan to tackle the housing crisis through strategies such as incentivising growth-oriented councils, reforming the rental market, and bolstering social housing.

New Research by Treasury and RBNZ Reveals Link Between Increased Housing Supply and Lower Rents

Collaborative research by Treasury, the Reserve Bank, and the Ministry of Housing underscores the crucial role of housing supply and wage inflation in influencing rental prices. The study reveals a direct relationship between nominal wage increases and rental upticks. Surprisingly, mortgage rates have limited impact on rents, indicating their effect on land prices instead. This study emphasises the centrality of housing supply in shaping rental costs and offers insights for effective policymaking.

Rental Inflation Driven by Wage Inflation and Relative Housing Supply and Demand

A research collaboration among the Ministry of Housing and Urban Development, the Reserve Bank, and the Treasury highlights wage inflation and relative supply-demand dynamics as primary drivers of rental inflation. The study spans from late 2003 to mid-2022, revealing that a 1% increase in income corresponds to a 1% rise in rents, and a 1% increase in people per dwelling results in a 1.5% rental increase. Notably, the study finds mortgage rates' limited impact on rents, underlining housing supply's critical influence.

Rental Yields on the Rise, but Will They Attract New Investors?

Although rental yields in New Zealand have increased over the past year, experts are not convinced they're enticing enough to attract new property investors. The average gross national yield in June was 3.1%, up from 2.6% in the previous year, but still relatively low compared to other investment options like term deposits, which yield around 5.5%. Rising rents have contributed to the improvement in yields, but property prices and mortgage rates remain significant hurdles. The return of interest deductibility, if reintroduced by the government, might offer some help, but the fundamental gap between yields and mortgage rates remains a concern for potential investors.

Current Concerns Among Tenants: Five Key Worries

Tenant advocates and property managers highlight five concerns affecting tenants amid rising rents and political promises. These concerns encompass rental affordability, security of tenure, adherence to healthy homes standards, compliance challenges, and legal gaps for non-classified renters. Tenants' voices provide insights into areas requiring policy attention and action.

That wraps up our latest 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.