Rents for central Auckland apartments down by $60 a week over the last four months

Rents for central Auckland apartments down by $60 a week over the last four months

There has been a significant decline in rents for central Auckland apartments over the last four months.

The latest bond data from Tenancy Services shows the median rent for all newly tenanted apartments in central Auckland has dropped from $520 a week in May to $460 a week in September.

That's a drop of $60 a week (-11.5%) over four months. It also means the median rent for apartments in central Auckland is now $40 a week cheaper than it was in September last year.

The decline appears to have affected all types of apartments, with rents for one, two and three bedroom units all declining over the last few months.

However although rents appear to be on the slide, the number of apartments being rented out has steadily increased over the last three months, rising from 553 in July to 910 in September. This was more than double the 437 apartments that were newly tenanted in September last year.

The central Auckland district includes all of the properties that lie within the boundaries of the former Auckland City Council before it was merged into the current super city. So the figures capture a wide range of apartment types.

But the figures are dominated by CBD apartments, which tend to be smaller and are more likely to be owned by investors than apartments in the suburbs.

These types of properties tend to be popular with students and for use as short stay visitor accommodation such as Airbnb. Both of these sectors have been hit hard by the COVID pandemic restrictions which is likely to be the main reason for the decline in rents. That decline could intensify over the next few months as many overseas students finish their studies and head home.

With no indication yet on when overseas tourists and students will be allowed to enter New Zealand in significant numbers again, the short term outlook for apartment rents in Auckland's CBD looks grim. That is why the Auckland CBD apartment market remains one of the few soft spots in an otherwise booming housing market.

Investors in particular are being very cautious on price, because it is so difficult to gauge a CBD apartment's potential rental income stream at the moment. However rent rises have been relatively modest in most parts of the country over the last 12 months.

Over the whole of the Auckland region, the average rent for all types of residential properties newly tenanted in the third quarter of this year was $539 a week, up by $10 a week (+2%) compared to the third quarter of last year.  Nationally, the average rent for all types of properties was $453 in the third quarter of this year, up by just $5 a week (+1%) compared to the same period of last year.

Not surprisingly, rents have been weakest in Queenstown-Lakes, where the average rent in the third quarter of this year was $500 a week, which was $125 a week lower (-20%) than the average rent in the third quarter of last year.

The second table below compares average rents in most districts throughout the country in the third quarter of this year with the third quarter of last year.

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63 Comments

Even though usually would be OK I doubt it is a fair comparison to do it year on year in the current context, would be more interesting to have the national numbers since the COVID crisis started, otherwise we are not looking at the right picture.
It would also deserve a special analysis for Queenstown's crash in rent prices of -20% which is the largest national YOY change on that list.

Nothing wrong with year on year. They are indicators only of course. With big individual indications.

b21
You clearly are not aware of the seasonal fluctuations in rents.
Just like real estate, there are seasonal fluctuations. Any uni student will tell you that rents peak in start of the year as students seek flats, but there is little demand for the same flats mid-winter and the going rate falls.
The post Christmas holiday period is also a demand time for rentals in general as people shift regions to start new jobs and an ideal time for shifting. Mid winter most people are happy to sit and reluctant to move.
If you check MBIE rent data you can see seasonal fluctuations most year. YOY comparisons removes this seasonality.
However, clearly niche rentals - such as Auckland inner city apartments popular with foreign students and Queenstown accommodation popular with hospitality and tourism workers - are going to see a drop in demand and rents.
However, rents generally remaining fairly stable for most of New Zealand as the data indicates is not surprising and although there may be some increase in unemployment this is likely to be offset by unemployed receiving accommodation supplements . . . and before one has a blood rush about the government propping up LL with accommodation supplements - maybe it is government propping up unemployed:)

Please stop patronizing everyone. Of course we are aware of seasonal fluctuations however this has been an unusual year and we are all aware of that, you know exactly what I mean when I explain the most relevant picture is not the YOY data, but obviously choose to ignore that.

b221
So, you want to determine what has happened over the past three to six months.
Will that be due to Covid or seasonality? That is neither to be ignored nor patronizing.
You have the MBIE monthly rental data - make what you want.
Bottom line, apart from Central Auckland and Queenstown unsurprisingly, rents have held up well as the data above shows. However, I don't think that really is what you want to hear.
Cheers

"That's a drop of $60 a week (-11.5%) over four months [May to September]. It also means the median rent for apartments in central Auckland is now $40 a week cheaper than it was in September last year".
Looks like Greg HAS given both YoY and impact from COVID.
What's $40/week? Maybe 10% down YoY?
Also on seasonality - sure, there might be some variations dependent on weather/student migration patterns. But greater than 10%? C'mon

EM
As mentioned in my post; no problem that Auckland Central (international students) and Queenstown (tourism and hospitality workers) have been adversely affected by consequences of Covid.
However, mbie data shows that median rents in most regions are up $20 YOY and that they have been showing seasonal fluctuations consistent with most years.
B21 is just trying to make a spurious case that Covid has had a widespread significant effect on rents and this is not backed up by data other than for Central Auckland and Queenstown.
Refer https://www.mbie.govt.nz/building-and-energy/tenancy-and-housing/rental-... - Mean rents by region [CSV, 26 KB] This data is based on notification of rents when bonds are lodged for new tenancies.

We all know you have vested interests in the housing bubble to keep growing since you have mentioned them here but your statements are completely out of line and do not agree with the very same data you provide, which shows for the regions in this article a drop in rent prices since their peak in April of $456.6 to fall a 3% down to $442.9 to then recover back to $452.5.
https://i.ibb.co/VwQY6r4/trend.png
If we choose September 2019 the picture is much different as I said, but doesn't take into account the dip caused by the pandemics effects. A similar effect can be seen gathering all national medians.
Regarding seasonal data, I have just checked historical data and there's actually little effect in seasonality except for very specific areas such as Auckland central. I know you won't apologize but at least get your facts straight!

This will make freehold properties with land even more expensive, as they should be.

The lack of students and tourists bringing prices down in some areas won't make those properties more expensive. They are separate segments of the market. What is your rationale here?

10
up

What is your rationale here?

There is none. It's just trolling.

New Zealand lost 2500 people in the last 30 days. A person working in the city and renting an exorbitantly priced room in a share house on the Auckland city the fringe may upgrade to their own apartment at the reduced rent rate. Then the share house needs a new flatmate. But there isn't anyone interested. The other flatmates can't afford the rent between them. So the flat falls over and everyone moves out. Then the landlord has an empty house that he needs to rent out. Does he need to lower the rent to secure a new tenant? What does that do to the underlying value of the house? The laws of supply and demand have to kick in sooner or later.

Yes Westie. This will be some kind of reality. The really shoddy apartment buildings will soon become ghettos but they will be cheap.

There is so much commercial property and office space in Auckland that can be converted to residential with relatively little effort. The 'property crisis' would be wiped out over night and rents could actually be commensurate with value. This is something the govt could focus on here and now..

I'm picking you haven't converted office space to residential? I have and it's a nightmare. There's a very long list of things you have to comply with, here's a few:

1) Double glazing, yep rip out ALL the windows and replace them.
2) Noise: All inter-tenancy and exterior walls need to be double thickness (2 sets of studs) with batts. Floors need to be a minimum of 150mm of concrete, or more batts. Noise rules also mean mechanical ventilation is needed for each unit.
3) Water meters: These are 13k a pop in Auckland.
4) Council fees: Resource consent fees, building consent fees, development contributions, reserve contributions and on and on.
5) Fire...

In summary, you'd have to be nuts to do this. It's actually cheaper and easier to knock down an office building and rebuilt a residential one.

In summary, you'd have to be nuts to do this. It's actually cheaper and easier to knock down an office building and rebuilt a residential one.

No it's not nuts. It could be all done on the govt's dime. It's just another infrastructure spend. The only complaints would be from the vested interests who see it as a threat.

It could be all done on the govt's dime. It's just another infrastructure spend

Provided the taxpayer ends up as a equity or debtholder in the venture, it is still a better way to spend money than accommodation supplements and motel lodging.

A simple handout makes no sense especially when the asset-owner could finish off the conversion and pawn off the building to foreign investors, making tax-free gains.

Sorry but all points you make even though they are valid make total sense and would not be different if you convert an old property to meet tenancy standards and people do it anyway.

The other day I wrote about owners of multiple properties in Auckland getting increases in property values as well as lower mortgage costs AND higher rental returns.

The higher rent aspect was questioned by J.C. yet here we have it on the record.

Rent increases in Waitakere, Papakura and Manukau especially are significant and this would be the same for non apartment Auckland Central as well. Apartment rents look to have gone down by 8% however Auckland Central as a whole has only gone down 1% implying increasing rents in other property types.

If I could refinance at higher leverage on the basis of a tenancy agreement at a higher rent. I might be tempted to find a sympathetic mate or a distant relative to take my property at an inflated rate. Even if I have to kick them back a little cash each week. The key is to get more leverage to buy more properties. That is the yellow brick road to riches right? Mortgage fraud has never been an issue in New Zealand and bank employees have certainly never been involved in the dark arts of property finance in booms times.

How prevalent do you think mortgage fraud is in NZ WesteAJ? And what form of fraud does it take? Do the banks just not do proper checks? (I haven't ever borrowed in NZ so don't know how stringent the process is)

It's all fun and games until a left of field event. Like a pandemic or a financial crisis. Or both at the same time. Everyones out swimming having a great time. You only see the shrinkage that some have experienced when the tide goes out.

12
up

When a landlord experiences an additional cost (even if it increases their capital value and the quality of their asset, like insulation) they are often very quick to pass it on to the tenant as increased rent, yet here we are, interest cost through the floor... but does it follow through as reduced cost to the tenant, in lower rents?

It's in comments here all the time. Landlords are very quick to talk up the need for rent increases but very quiet when their costs decrease. And then complain when they are derided. We can all appreciate that being a landlord isn't a charity, but many professions operate with a notion of ethics. Market forces aren't allowed to work freely across this market, there are so many distortions so I do feel very sorry for tenants.

I'm really just pointing out that Landlords seem to have been big winners this year on three fronts. It does seem quite unfair.

However a lot of landlords have been through hard and dark times, grabbing as much overtime as they can stand, eating baked beans on toast, driving old bangers while the tenants drive flash cars and go to restaurants. Sleepless nights when they realize a property crash of 30% could entirely wipe them out. Bearing the brunt of the scathing criticism of the random interest.co commentators. Always living in hope, looking to the far future when their houses will finally start to earn a modest profit keeps them going. So when the time eventually arrives its hard to be especially generous because this has actually taken a lot of risk and work and eventually generating a good income has always been the objective.

Also don't forget the introduction of ring fencing and higher healthy homes standards requiring heat pumps and extractor fans and insulation. You kind of have to make hay while the sun shines because it was looking gloomy not that long ago.

I'm sorry, but you don't get to frame 'eating baked beans on toast' as going through 'hard and dark times' when it's entirely down to the investment choices of the bean-eater. No-one is forced to buy an investment property. If they chose to sacrifice a good diet and leisure time to do so, that's no different than someone choosing to spend so much of their income on buying shares that they can only afford beans on toast to eat. If they then complained that 'times were hard' we would laugh them out of the room.

The question was about why landlords were reluctant to pass savings onto tenants. Someone who went without to invest in shares wouldn't be expected to give some of those returns back for any reason. They would be applauded for taking the risks and doing the hard yards.

And your answer was 'a lot of landlords have gone through hard and dark times'. As pointed out, it's nonsense to claim that a person's choice to put money into an investment rather than eat a decent diet is just that - a choice - and not an indication that they've gone through 'hard and dark times.'

Probably a bit too esoteric for me to understand. We chose to do without in order to make an income later.

That's exactly point. You chose it. What you don't get to do is use the fact that things are 'hard' for you entirely for reasons of your own choosing, and only in order to benefit yourself later (and no one else) in order to justify making things harder for those worse off than you. And there are very few tenants who are better off than their landlords. You charge the rent you do simply because you can do so and still keep tenants - at least have the guts to own that fact.

Nope. Leasing and renting property is just like another consumption good and service. When incomes are toast and your customer base is declining, that is not 'winning.'

But that's not happening J.C. I'd agree if it was but it isn't at the moment. I did write, "make hay while the sun shines". Well aware that things could change.

But that's not happening J.C. I'd agree if it was but it isn't at the moment

The data posted above suggests it is happening. And it's happening all over the world. But if you have an evidence-based case, feel free to share.

I would suggest that "suggests" is not very convincing. You're crystal ball gazing. The data shows rents up everywhere in Auckland except apartments. Classic Auckland landlords don't own apartments. Mortgage interest rates are down significantly. House prices are increasing.

I would suggest that "suggests" is not very convincing

Don't care. The data is what it is. Rents didn't just fall 11% in Central Auckland for no reason.

People don't want to live in apartments during a pandemic. A lot of migrants rented apartments. There's your reason/s. Why are you ignoring the other other data? Why are you assuming Auckland apartments are indicative of the entire market when they never have been?

Also right back at you, rents don't go UP in Manukau for no reason.

For the prudent who value security, the payoffs won't be great, but the nights of sleep and no fear of being wiped out should the market crash, are good dividends.

GN, from a theoretical perspective rent should be determined by the marginal cost of providing it. So if the value of a house rises, then ceteris paribus the rent should rise. If interest rates fall, then ceteris paribus the rent should fall. If council rates rise - then CP rent rises - and so on. Rates have actually risen a lot, as has insurance in Wellington. If house prices have risen more than interest rates have fallen - then rent should rise. If this relationship deviates then renters may buy or vice versa and the arbitrage closes.

I'm not an apologist for crap landlords, I'm sure there are plenty. But there are also decent ones as well. I also have no issue with increasing tenant rights, except for removing bad ones.

GN, from a theoretical perspective rent should be determined by the marginal cost of providing it.

Nope. Demand elasticity is far more important. That's why rents in San Francisco are down 30% yoy.

Wrong, try again.

Nope. I am correct. Demand for rental property is like a consumption good. Rents have fallen up to 30% yoy in SF (see below news, which I don't believe is "fake"). Demand for rental properties is not inelastic.

https://www.nbcbayarea.com/news/local/san-francisco-sees-dramatic-drop-i...

The government in cahoots with the reserve bank has been able to suspend reality. Money Printing, Mortage Holidays, Wage Subsidy, COVID Dole, Winter Energy Payment, Benefit Increases. But if we can't or won't turn the tourism/immigration tap back on. Then reality is going to kick the over-leveraged in the face sooner or later.

You haven't studied economics have you, do you think a lease is priced as a consumption good - I'll help you, no. Metropolitan San Fran rents are falling (like Manhattan, Queenstown) due to a one-off exodus from Covid. Interest rates have fallen in the US and most likely house prices have fallen in Metro San Fran anyway. It also looks like 30% is the extreme and probably less. House prices down 10% in metro San Fran, Mortgage rates has fallen by a 1/3rd - easy 20% fall in rents at a marginal level.

Also, I never said it was instantaneous, it's a long term relationship.

You haven't studied economics have you

Yes I have. I even do price testing and price elasticity work using conjoint analysis.

Rents for apartments in central Auckland because there is less demand and also less income. Similar to what is happening in SF, London, Manhattan, and multiple cities all over the world. Demand for property is elastic, much like for consumption goods.

I reckon if we take a random sample of house prices and rents, factor in costs, there won't be much positive/negative carry either way. High positive carry tends to attract investors (Dunedin/Palmy), negative carry tends to indicate over-pricing or the premium end of the market.

It transpires apartment prices in metro SF have fallen by 10 to 20%, which would get you close to 30% fall in rents.

I reckon

I don't really play the 'I reckon' game. Also, rents in SF are a function of demand and income, not apartment prices.

Reckon = establish by calculation

Being bellicose and wrong is not a great combo JC. Apartment/house prices are the single biggest determinate of rent. Does Dunedin have higher rents than Auckland?

Sorry but you are wrong, the relation goes the opposite way since incomes play a much higher role in rents, this can actually drive prices up since investors would expect higher returns on rental investments.

That's generally not the case in my view b21. Incomes play a role in determining house prices (housing affordability), but less so with rents. If a rental market is much higher than the cost of providing the accommodation (ie the house/unit price), investors enter the market, buy property and rent them out for positive carry. This moves the price up until that positive carry is gone.

You are confirming my point, your reasoning starts with the rental market going higher, in order for a rental marker to go higher in the first place that would mean tenants can afford renting in that area, which triggered by household income.

Apartment/house prices are the single biggest determinate of rent

Incorrect. If you buy a house for $3 mio and put it on the market for $3000 pw, the rent is decided. If the place does not rent because 1. the rent is too high relative to income for potential tenats; and 2. there is better value for $3000 pw, then the rent is too high. The price paid for the home is irrelevant.

Where did the $3k come from? If a person can afford to wither buy or rent that house, they will do so (in the absence of emotion) based on which is the cheaper option based on the cheaper option. If renting is cheaper, more people will rent, but those houses have to come from somewhere and if it's an investor, they will only provide it if it carry's positive. The marginal new rental will be the cost of buying and financing - excess carry either way is arbed out.

Yet again we will have to agree to disagree, I don't have the time/energy.

It's a hypothetical and I actually know of a house in Mission Bay asking for this rent. The owner lives in HK and I told him good luck finding a tenant.

Regardless, the point is that rents are a function of income and demand (willingness to pay), not house prices. It's no different than bring an FMCG product to market. Cost of production and bringing the product to market are all irrelevant if there is no demand at the price point that the manufacturer requires.

JC it simply cannot be that the rental value of a house is not directly related to it's economic value. Am I really going to pay the same rent for a 2 bed apartment over a 2 bed house with outdoor space in the same street? There are exceptions to every rule, but I am comfortable that at the margin, the rent of a house in the long run is highly correlated to it's price. In my experience, expensive houses carry very poorly which is why they are rarely investor owned and mostly families.

have a good weekend.

I did 5th form economics. I remember something about supply, demand and equilibrium. Maybe those laws don't' apply any more.

Trickle down, vs LL pocket. Very few tenants win that debate.

THIS.

Just been visiting my one and only CBD apartment. Rent is down by $100pw and I'm happy to be getting it. 16% of the apartments are empty - most for the last couple of months. I'm expecting mine to do likewise in December.

Yep, must be a bit tricky. I have 3 apartments in South Auckland and have just had 1 tenant say they are leaving for Whangarei. It will be interesting to see if it lets OK or not. It actually might be good that it's so far away from the CBD - different tenant markets.

CBD is a different market. My property agent says it is cheaper to share a large house outside of the CBD. The problem is all the jobs and the next echelon of foreign students in the city have gone. Of the four tenants in my apartment one left two months ago so we had to drop the rent to keep the other three. An one Brazilian wants to leave in December because of no prospects here.

dp

The CBD apartment collapse was so predictable.

People are heading to the suburbs for more space:

https://www.newstatesman.com/spotlight/coronavirus/2020/09/space-race-ho...