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Housing report: Houses available for rent dropping off, sales listings rise
October 20th, 2009Click here to watch this morning’s video.
Bernard Hickey delivers another housing report in association with ASB, including a look at how the number of properties available for rent has dropped off in recent months as landlords put their properties back on the market to sell. Here is a link to the interactive chart on properties for rent.
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October 20th, 2009 at 1:46 pm
Hmmm…. I wonder if Bill English’s veiled comments will have an effect on the enthusiasm for putting properties up for rental
“Distortions are created by the things we do not tax. Most people would see it as unfair, for example, that speculators can reap large tax-free gains while low and middle income workers are taxed on every dollar they earn.
Inland Revenue has published data showing that last year the losses claimed by people with rental properties were $575 million more than the income declared from residential rentals. The net reduction in Government revenue was approximately $150 million, while the capital value of this asset class roughly doubled.
This is a recent trend.”
It is becoming increasingly clear thru signals that the two areas of taxation change are going to be an increase in GST to 15%, and some form of structural change in property to reduce or remove what has effectively become a giant landlord subsidy from the IRD. Removing this latter would have an enormous impact on the incentives to own rentals, & change the dynamics of the whole housing market.
On the one hand, Key & English may well be too terrified of the outcomes from this to actually implement meaningful change. On the other hand, they have no choice – borrowing $250 million per week, partly to subsidise landlords, is hardly sustainable.
http://www.interest.co.nz/ratesblog/index.php/2009/10/19/have-your-say-bill-english-wants-to-close-loopholes-for-sheltering-income/
October 20th, 2009 at 1:56 pm
Philly,
I agree, there are promising signs from that speech. I think the govt needs to realise that if they market this properly then it is not political death. MOST PEOPLE DO NOT HAVE INVESTMENT PROPERTY.
October 20th, 2009 at 2:04 pm
jimmy – good points, but a higher proportion of parliamentarians do, “HAVE INVESTMENT PROPERTY.” See second link in this comment:
http://www.interest.co.nz/ratesblog/index.php/2009/10/19/securities-commission-warns-of-lack-of-transparency/#comment-42489
Plus, the ‘legitimacy and trust’ problem needs appropriate attention to properly facilitate change in investment behaviour.
October 20th, 2009 at 2:56 pm
Les: good points as always. When I made my post, I forgot that MPs have got their snouts in the property subsidy trough and, unlike Bill Clinton, are definitely inhaling.
October 20th, 2009 at 3:10 pm
I still think it would be worth investigating whether MP’s are divesting themselves of their investment property. They could justify it as ‘removing the appearance of a conflict of interest’ and noting that ‘the elecorate’ had indicated that they should do so – coincidentaly just before any change in the taxation implications!
October 20th, 2009 at 3:12 pm
Harriet: maybe MPs doing that could be accused of insider trading! For once I would be prepared to turn a blind eye to this, if the end reforms removed the distortions in the property market!
October 20th, 2009 at 4:17 pm
um….so one the one hand we have ppl “running” into rental (I assume) property, and on the other we have ppl trying to get out (of rental?). So if its stabilizing, why get out? the time to get out was before the drops, then buy back in? Surely if the market is going upwards its a time to hand on? Unless the feeling is a CGT/land tax is a serious possibility? and then if so why go into property? is the wise money getting out? and the dumb ones going in?….lots of Qs…!!
October 20th, 2009 at 4:32 pm
Steven, you raise a good point.. where is the (wise) money going? Food, energy and raw materials is where, from production, to supply and distribution.
October 20th, 2009 at 5:02 pm
Steve and Matt,
Wise money shoudl be going back into long term TDs (ie get 7%). The share market is overcooked again, property is well .. awful, gold is overcooked. I’m putting money back into these once I can wait a year to halve my CGT.
The other alternative is overseas property eg Japan or US. Could get both a currency benefit AND a price rise.
October 20th, 2009 at 5:32 pm
English property is looking good mid to long term, reap the bounce-back and exchange rate.
October 20th, 2009 at 5:48 pm
Bill English’s property . Or stuff in the UK ? ‘Cos Wild Bill is a canny lad with the allowances and loopholes .
October 20th, 2009 at 8:43 pm
This govt has a lot more to worry about than a few new property taxes!
October 20th, 2009 at 8:49 pm
Shortage of rentals advertised is more likely to be that tenants are less inclined to change house just for the sake of it.
When times are tough tenants hang tight and don’t want the expense of moving trucks, overlapping rent in the week of the shift, moving SKY connections, phones, broadband etc etc. It’s expensive to move so they are staying put so less advertised.
Also many of the accidental landlords refinanced at pretty low fixed rates earlier in the year and will now keep their investments for the long term.
October 21st, 2009 at 9:00 am
remember less rental properties => higher rents. For those in favour of CGT, don’t wish for what you don’t want to see, CGT will simply push rents to hyper space. Sydney rental market is prime example.
October 21st, 2009 at 9:13 am
Bollard’s been quiet lately…is he preparing for an early ocr rise…or just preparing the wording in the next jawboning rant?…Matters not when the banks are saying bye bye and lifting rates according to what happens across the ditch. The games going on between Bernanke, the bond buyers, the BoE and SquidGoldman are starting to stumble over the compexity within the plan to confuse the market into believing everyone wants to buy US IOU toilet paper. Now everyone is so confused they are selling the Dollar for a loss and buying commodities…any commodities. Pretty soon you will be able to buy Dollars by the Pound!
October 21st, 2009 at 9:22 am
”CGT will simply push rents to hyper space”
Risible nonsense. Landords always seek to maximise rent but can only obtain what collectively tenants can afford to pay.
October 21st, 2009 at 9:31 am
This is actually what happenened in Sydney when CGT and abolition of negative gearing came in in the early ’80’s in Sydney. I was out of Oz and renting my place in Paddington.
Some landlords put up rents to compensate…and the tennants left properties empty as they couldn’t afford to pay more ( see andy h, above); then the rents dropped as landlord wanted ANY tenant to fill their now empty property, as any income was better than none, to at least have some rent coming in to offset the mortgage payments. Things then normalised across time, and ultimatley taxation rules changed, again!
October 21st, 2009 at 9:44 am
Harriet – indeed, when confronted with landlords trying to increase rents beyond what the market will take potential tenant DO have other options – move in with friends, family, flatshare etc, thus removing demand.
Potential tenants also resort to such approaches during tough economic times; it has been a feature in the UK for example these past 12 months. Landlords ignore such mechanisms at their peril.
October 21st, 2009 at 9:51 am
You may get the tenant in the short term but they spend the whole time looking for something cheaper
October 21st, 2009 at 9:56 am
Looks like a whole bunch of Americans are discovering the joys of living in a tent…to save on rent…will it catch on in Noddyland with tent towns springing up, as the peasants who cannot afford the price of an average wooden box, refuse to kowtow to the local mafia and sign up for bloated mortgages designed to keep the price of the boxes as unaffordable as possible with the full backing of the NZ government and the RBNZ and the awful money chasing poodle media.
October 21st, 2009 at 10:03 am
Its not land tax/ CGT thats scaring property investors. Its the serious talk from the tax working group at victoria university about the hole in property tax that has caused epic levels of negative gearing to minimise personal tax.
Essentially the government/tax payer is subsidising around a third of the property investors expenses (by way of less tax paid on personal income) that they incurr while banking the tax free capital gains.
Many very wealthy people in this country own many properties to maximise there losses so they can minimise there personal tax.
A lot think its a secret and that they’re super smart (or there accountants are…) because they set things up this way. The TWG highlighting it as a ‘glaring hole’ will be enough for many to start sh*tin themselves…
Also regular home owners often buy a rental property and load up the mortgage on the rental to pay off there own home. This means they make a loss on the rental property (deliberate loss) which can then offset there personal income so they pay less tax, aswel as take advantage (or rort…) such systems as student allowances for there kids and working for famillies.
A friend of mine in university got maximum student allowance (meaning parents made total of around 40k or less) dispite his parents owning 5 rental properties and living in a 800k family home. Similar stories have emerged with working for families.
October 21st, 2009 at 10:04 am
Here they go again…..”Kiwibank is increasing its fixed mortgage rates for the second time this month” (NZ Herald) You don’t think maybe this is a new trend…I mean rates couldn’t be set to rise and rise….could they?
October 21st, 2009 at 10:12 am
The simple remedy for the WHOLE SHEBANG is stop paying the BILLS…
One way or the other…prices will plummet.
Supermarket, Takeaway, Cafes, Cars, Electrical, Rent, Rates, Improvements, Petrol, Lawn mowing, Beef, Milk, AMERICAN MONEY, dog biscuits, Poly wages. Plastic toys.
Airline tickets….
There is no end…but I shall keep going…
Broken promises, Rorts like Insurances Co’s, pensions, in particular, Finance Company debenture rorts, CRAFARs, ..etc all depend on one thing…
If ya plumber asks too much, or the TV or Rugby personality, give em the old heave ho.
Or for that matter, BOLLARDS, HUBBARDS, BERNANKE, YANKEEs, BUSH, OBAMA, BROWN, GREENS, BLUES, RED CHINESE, et al.
NO BRAINS, no money left, except via extortion and unable to pay their bills…so why pay yours.
It all depends on RAW SUPPLIES being bought and/or money changing hands.
For a start remove all cash in hand from the BANK…too.
Just everyone STOP for a week and see what eventuates.
Those who cannot stop SPENDING, what they have not got…doom themselves to this fiasco, all over again.
Read my lips. ….
THE POWER IS WITH THE PEOPLE.
October 21st, 2009 at 10:17 am
Hi People
You guys are not renters from what you are saying here. As a renter I don’t want any policy change to potentially increase the rent.
Please, please think about renters.
October 21st, 2009 at 10:22 am
My rent just got increased by $20/week. Recession is over, back to madness
October 21st, 2009 at 10:23 am
Meanwhile the deposit rates are not in such a hurry to move up. Notice the widening gap / (profit) margin / fat beginning to develop.
October 21st, 2009 at 10:24 am
Agreed Liam.
How about a simple LEVEL PLAYING FIELD for all.
Someone up their needs a REALITY CHECK…
THE INTERNET
is the BEST MEDIUM
to LEVEL THE BOARD
Across ..THE BOARD….
WORLD-WIDE.
I am not a COMMUNIST, BUT…a realist.
October 21st, 2009 at 10:27 am
I’m a renter, renter, and can’t wait for the policy changes! Rents will not increase, unless wages do ( always a possibility, but not a probability just at the moment); available properties for sale will increase! That makes the yeild an investor has to acheive less in dollars terms, at a lower purchase price, and thus makes rents cheaper…… bring on the changes !!!! If your rent increases, like John’s above, then move if you can’t afford it. Nothing like an empty house for a few weeks to remind a landlord of who pays whose mortgage. And re gingerbreadman below, I have…and it’s easy…!!!
October 21st, 2009 at 10:29 am
I am a renter and already see the effect of rising rents – For you guys, ever try to rent a DECENT 3 bedroom house in Auckland? Impossible is the key word!. I was talking to a person few weeks back, he wanted to rent a 4 bedroom house and willing to pay 4 figures weekly rent. he found one in Mt Eden, there was 8 people on the waiting list !!!! Get out there and see the real world.
October 21st, 2009 at 10:37 am
Harriet et al,
Yes you would expect that type of response from renters if the landlord tries to pass on taxation costs. It was a tragedy that Paul Keating reversed this and Australians are all the poorer for it. I think this more than enything else will drop house prices. The impact wold be 3 fold
1) drastrically affects the cash flow and therefore the amount of leverage one can get. HOW MUCH?? If you buy a proprerty with 4% yield, costs are 10% of house(interest + other costs), loss is 6%. Loss after tax is 4%. 2% of median house is around 8-10,000 per year. This would support another 100-150,000 mortgage.
2) alters the break even point. Under above scenario you need to make 6% gain with the credit, 4% without it. 6% is impossible long term, 4% is probably impossible long term as well but more doable.
3) Psychological – govt aint going to provide a free ride any more.
October 21st, 2009 at 10:37 am
For those worried about increased rent this is from wiki on land taxes:
“This does not apply to LVT, which is payable regardless of whether or how well the land is actually used, because the supply of land is inelastic, market land rents depend on what tenants are prepared to pay rather than on the expenses of landlords, and so LVT cannot be passed on to tenants.[3] The only direct effect of LVT on prices is to lower the market price of land. Put another way, LVT is often said to be justified for economic reasons because if it is implemented properly, it will not deter production, distort market mechanisms or otherwise create deadweight losses the way other taxes do.”
October 21st, 2009 at 10:39 am
How about one of these Harriet…..
http://www.explorationtents.com/product.asp?p=8
pitch it on Helen’s back lawn.
October 21st, 2009 at 10:39 am
gingerbread – completely disagree. but if what you are saying is correct it is clear evidence that govt tax subsidies DONT result in decreased rents
… and maybe Mt eden is not the real world.
October 21st, 2009 at 10:44 am
Small world, Wally! Our dinner table discussion last night concluded with, ” Well if it doesn’t work out, we can always go and live in a humpy somewhere “. ( Aussies will know what one of those is !)
October 21st, 2009 at 10:52 am
The simple fact is DO NOT PAY.
The people who over-pay, doom themselves to renting, therefore perpetuating the RORT that is the Property Speculation bubble and frankly ..FAVOURITISM to certain PARTIES, as I have tried to point out here and elsewhere.
I have never lived in a City, including Auckland.
Buy a house eventually elsewhere and have a REAL-LIFE. You can always visit, when needed.
I retired early, travel, so can you, but do not follow the CROWD into a MCMANSION or an overpriced FLAT…… it so limits your options.
The DEBT trap is just that.
DEAD MONEY. DEAD LIFE….
LIVE.
THINK.
October 21st, 2009 at 11:00 am
I was a renter , for many happy , care-free years . Then the ” child-bride ” entered my life . A house was demanded . Responsibility . Rates , insurance , woodworm , clagged gutters ………….. Now I’m a drinker . And a worrier . Who can afford a mortgage , booze , and gummy bears …………. You renters have it all . Smug sods ……….
October 21st, 2009 at 11:07 am
I was ready to move on, could find it for same price, but then would have to pay $50 for Telecom, $200 for relocation, again letting fee, and take day off the work. And moving with little kids is a nightmare.
October 21st, 2009 at 11:17 am
Juts imagine how much more complicated it would be to have to sell a house when your ready to “move on” John. All those agents and open homes to deal with; LIM’s to get; solicitors to pay etc not to mention trying to find the next place to buy AND all those items you mention. You probably get the added bonus of paying more mortgage repayments each week than rent as well! Renting may have it’s drawbacks, but doesn’t everything ?
October 21st, 2009 at 11:27 am
well i can say i had one rental empty just recently for an unfortunate extended amount of time, i wanted a good tenant paying what i saw as fair rent – and i was not about to rent it to some scamster with a dodgy credit rating who would end up not paying rent and damaging the place (it was part of my apprenticeship to learn such things the hard way) – anyway, my decision was to suffer while it was empty and not to drop the rent as it could have effected the existing rents on the other surrounding properties we own, and also the combined commercial valuation of all these properties…. anyway long story cut short, finally found an appropriate tenant, filled the tenancy, and next thing had two more appropriate families begging for it, and rental agents also calling to see if they could take their own clients around, so after our mini drought it did not just rain, it poured, my recent experience tells me the rental market did an about face within the last 14 days.
it is no longer looking just like a renters market, there is a shift taking place, things are balancing out and although prices are not yet being pumped up, i don’t see them dropping either.
IMHO there is a 50/50 chance within the next year or two we will see again the auctions for rent we saw in 2001 when all these desperate families would all go to a rental open day and offer to pay more per week than the others who where also there looking for a place to rent – such a market condition will set the rental weekly prices all by itself and the losses some landlords carry forward or offset against personal income will therefore drop or diminish, unless there are blatant capital improvements for anticipated capital gain…
as for property speculators – i am not one – i am a long term property investor – so please do not confuse me with that mob…
October 21st, 2009 at 11:35 am
And I am not anti-property investors either, POP. I believe that rents should always be HIGHER than the cost of owning a home, to justify all sorts of risks that you outline, not lower, as we have here due to historical stupidity on the governments part. Let’s take away the ‘desperate gambling’ aspect of property and return it to the likes of yourself. That can only happen, now, with lower or historically normal property prices that do not drive our citizens into an eteranal chase for ‘free wealth’.
October 21st, 2009 at 11:48 am
John where are you renting? Rental is dropping..A friend is moving from Penrose to Mt Eden because the (one room) new rent costs $120 incl. I will look for one cheap rent..
October 21st, 2009 at 11:53 am
Harriet and POP,
Agree. I am not anti property either, if the yield is reasonable (circa 7.5% +) I would be happy to buy. I live in Mlebourne, even worse than NZ. Rent a 1.1 million house (valued last month) for 490 per week. A yield close to 2%. PATHETIC!!!! But my friends at work are all busily sizing up investment options, one told me “the tax break from -ve gearing is too good to turn down”. Geez – when I see people like this entering a market purely on the back of low interest rates and industry hype I realise where all the so called “demand” is coming from. Speculators.
Aus does have genuine issues re supply and immigration levels that are too high, but like most bubbles a small component can be justified, the rest is everyone jumping on the bandwagon. As i tell my friends, yes AUS does have more of a housing shortage than the US, but does this JUSTIFY A PRICE TO INCOME RATIO TWICE THAT OF THE US. Its a clear example of a “real” demand factor being spruiked and teh additional speculation maybe multiplying that facto ten fold. Dot com is a good example of this. It was always true that ecommerce was going to reshape the world. This did not mean that ANY company despite not having a business plan and making no profit was suddenyl worth hundreds of millions. Property is no different. Yes the REAL value of property will go up over time. but currently the existing price is twice teh real value, the result being a loss making investment with no prospect of being positive for another 10 years. CRAZY!!
October 21st, 2009 at 12:00 pm
It certainly is, jimmy. My architect sister went to an abandoned warehouse auction in Port Melbourne last weekend, expecting to pay cira $600k for the knock-over-and-build a small appartment business she runs, and it went for $825k ! to a couple who had just got their FHB grant. “Too good to miss the incentive”, they said….crazy….
October 21st, 2009 at 12:37 pm
It’s tight here in Wellington. Iam looking to buy for sime time now, can’t afford anything in downtown, and not keen to comute to work neither. So, will swallow extra $20/pw and stay put.