Christchurch earthquake helps soak up excess rentals

Media Release

Tuesday April 19, 2011

Christchurch earthquake helps soak up excess rentals

Hundreds of refugees from earthquake-stricken Christchurch are soaking up excess rentals in both North and South Island towns, First National Group says.

The real estate network’s quarterly survey of its property managers found demand for rentals was steady and rents were rising more strongly than 12 months ago.

First National Group general manager John Stewart said Trade Me recently reported a rental glut with listings up 11% on the same time last year despite demand being down just 1%.

First National’s property managers reported a national vacancy rate of 4.8% for the quarter, compared with 2.5% at the same time last year. However, this was partly caused by Christchurch having higher vacancy numbers than usual with uninhabitable properties.

Our research suggests that there is no ‘glut’ but some additional stock for rent on Trade Me is possibly linked to the earthquake and would include holiday homes and other accommodation not usually on the rental market, Stewart said.

Most of our property managers report slightly less inventory in their geographic area than the same time last year, and the fact that rents are rising more strongly than this time last year would support that.

Perhaps the excess listings reported by TradeMe is also due in part to private landlords trying to rent out properties not up to scratch, as our property managers commented on the need for good quality homes with an increasingly discerning tenant populace.

Another comment which came through in several towns in New Zealand was a shortage of ‘good tenants’. You can’t blame landlords for being keener to protect their investment than rent to people with suspect credit histories.

Stewart said the Christchurch earthquake had dispersed residents to areas including Auckland, Timaru, Ashburton, Blenheim, Nelson and Central Otago, reducing vacancy rates in those areas.

The earthquake has certainly caused a dispersion but also families are sharing with other families as job losses on top of loss of home and contents is causing financial stress.

All these factors influence vacancy rates but must not distract from the real picture which is that demand is pushing rents up in more places around New Zealand than the same time last year.

Thirty-seven percent of First National’s property managers reported increased rents year on year (up from 26%), 47% stayed the same (from 51%) and just 16% had dropped (from 23%).

Median rent rises were $10 per week (2brm), $20pw (3brm) and $30pw (4brm).

Median rent decreases were $10pw (2brm), $15pw (3brm) and $20pw (4brm).

Within most towns, types of properties either in shortage or oversupply varied.

Supply and demand in all but four offices was a mixed bag. Even some areas where demand is highest have oversupply in some types of property.

For example some parts of Auckland, where vacancy rates are lowest, reported an oversupply of high end 4bm properties in their area.

One and 2-brm properties were the most oversupplied while 3brm properties were in highest demand, especially mid range in price. However, 32% of offices reported shortages of lower priced properties, suggesting tenants were downsizing.

Ends

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