Christchurch earthquake refugees are filling rentals across North and South Islands, says First National. What are you seeing?
Christchurch residents fleeing their city are snapping up available rental properties across the country in a trend that is also pushing up rents, according to First National Group.
Despite TradeMe figures pointing at a rental "glut" nation-wide with listings up 11% on the same time last year, real-estate firm First National Group says overall availability is actually declining, a pattern disguised by both an influx of properties coming on the market in direct response to crisis and also higher vacancies generated in Christchurch. See our earlier article on Trade Me figures.
First National's general manager John Stewart said the aftermath of the earthquake was impacting on real estate sectors across the country.
"The earthquake has certainly caused a dispersion, but also families are sharing with other families as 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.''
Hotspots for Christchurch migrants include Auckland, Timaru, Ashburton, Blenheim, Nelson and Central Otago, where vacancies rates are falling and rents rising.
Thirty-seven per cent of First National's property managers reported increased rents year on year (up from 26%), with 47% reporting them as unchanged (compared to 51% last year) and 16% indicating they had dropped (from 23% previously).
Median rent increases for a two bedroom property were $10 per week, $20 per week for a three bedroom, and $30 for a four bedroom. Median rent decreases were $10 per week for a two bedroom, $15 per week for a three bedroom, and $20 per week for a four bedroom.
First National's reported national vacancy rate for the first quarter of the year is 4.8% compared to 2.5% last year but again Stewart attributed this to an increase in uninhabitable rental properties that had become vacant in Christchurch.
Property managers with First National say they're seeing an interesting change in the rental market demographic with an "increasingly discerning tenant populace" on one hand and but also a stronger demand for "good tenants".
"You can't blame landlords for being keener to protect their investment than rent to people with suspect credit histories,'' he said.
Stewart said supply and demand for particular type of rentals was a "mixed bag" amongst the towns reporting.
"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,'' said Stewart.
"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 four bedroom properties in their area.''
Three bedroom properties were overall the highest in demand, particularly those mid-ranged in price.
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44 Comments
"Most of our property managers report slightly less inventory (but)..reported an oversupply of high end four bedroom properties in their area.''
Guess what those high end 4 bedders are going to do to get tenants? Yup...drop their rents. That will compress all the tiers below them. After all,why pay the same pro rata rent for a mid tier 3 bedder as a 4 bed upper end? Besides; it provides sharers with an additional room to spread the costs amongst.
That's my point. Your Landlord! Why would 'I' rent yours when I can get a better one; that's larger for less pro rata rent? If the ones in the tier above you want to rent them out, they'll have to drop their rents, or stay untenanted, taking away the likes of 'me' - those that would otherwise have rented from you, thus leaving 'you' empty, and you having to also drop your rent if you want to compete.
Rents are not falling though Nick. My rent in Glenfield is up over 8% in less than a year and the lower North Shore-area property manager tells me his vacancy rate is less than 1%.
Despite the Professionals comments, there is no evidence the North Shore has lots of vacant properties, in any price range.
There may be pockets of higher vacancies in some price ranges somewhere in New Zealand but not on the Shore.
In some provincial towns I am seeing good numbers of houses available, but tenant demand also seems healthy so a balanced situation. It's in Auckland (more specifically, central, the North Shore and Hibiscus Coast are my areas) that I see good tenant demand AND not many houses available.
Auckland does seem different to many (not all) areas of New Zealand.
Rents will fall as disposable income evapourates, Your Landlord. It may not happen overnight, but it will. It has too. How do people pay for their livelyhood if wage rises are not forthcoming, otherwise? ( and wage rises cannot come in an environment of high to rising unemployment). Sure, they may move from you to another and your particular nominal rent may remain untouched or even rise, but overall, the rental income pool that's available to be paid... is shrinking.
Within Christchurch itself demand is not there at all.
After an initial post EQ rush, we are now having to drop rents to attract any enquiries. Considering tens of thousands of houses are not really habitable, this is surprising, but of course the exodus has been huge.
I asked one young tenant at a property today "how many of your friends have left town?" The response was "over 50%".
So a solution is needed immediately. Most won't return unless new jobs are created.
Currently the city is in a downsizing mode, the idea of the Govt building temporary houses is ludicrous. There is much more slack in the existing housing stock than the 300 they are looking to waste $50m odd on.
The solution to ChCh's problem is simply not to rebuild the 10,000+ properties on severely damaged land. Instead just payout the homeowners full market value - this would prove a cheaper alternative as it's unlikely land, roads and services could be fixed for less than $100,000 per site in some areas, and many of those areas have land values only around that level. Of course a 120m2 $250,000 1960s house plus garage etc in Bexley with full replacement policy would cost the insurer probably $220 - 240,000 to build new. If EQC need to pay $100,000 or even just $50,000 to fix the land, then it would be cheaper just to pay out market value or even above market value to limit the insurer's and EQC's liabilies.
Whatever happens (whether homeowners walk away handing keys to the banks because EQC and insurers are procrastinating and the homeowners never won't to move back anyway, or if the Govt come to their senses and pay people out) the exodus will continue, paticularly as businesses fail, hence demand in other centres will increase as will rents.
The only solution for ChCh is if those houses in the worst areas aren't rebuilt.
I live about 15 mins from CBD southwest CHC, two houses have come up for sale in our street, both sold within a week. both by landlords and both have already got 12 month rental agreements in place, before earthquake they would of taken some time to sell/rent, I suppose there is demand on the areas which have had little damage for those that have stayed (have there jobs still), but do agree with number of business going that there is little chance for hospitailty workers, tourism workers etc as they are hardest hit in this with the CBD gone, little chance for younger workers as well many of whom started of in this types of jobs. Just hope that perhapes the re skilling for construction jobs etc does kick in soon.
Chris - when the "Rebuild" really does start in earnest (late 2011?) surely the population will come back up a bit? I know plenty of people in the architecture, engineering and construction buinses who are positioning themselves to relocate to ChCh. With diversion of funding to ChCh a lot of projects are going to be delayed in Akld, I think Akld faces a difficult couple of years, people will go where the work is and that is likely to be ChCH
No?
A young qualified electrician looked at relocating to Christchurch thinking there would be the opportunity for his fortune to be made. Fletcher's told him the going rate was going to be $45 per hour and he had to meet all his own expenses. So he's gone to Perth to check out the job market there - he has mates there.
With regards to Tauranga. I spoke to a retail shop worker (holds two uni degrees) who had moved to Tauranga due to partner being based there. Said it isn't easy to get work there and that that was a familiar story among new arrivals there. Too many people moving there, not enough jobs.
Good luck with finding rebuilding work. A lot of people simply aren't interested in rebuilding, cashing up and running is the favorite idea.
On top of that insurance companies are being difficult, trying to force indemnity payouts by delaying offers of settlement so long that all income cover is used up so that there will be no time for owners to rebuild.
The question has to be: after September perhaps 5,000 houses needed rebuilt and maybe 500 commercial buildings (guesstimates). What happened after 6 months - nothing. 2 months since Feb the CBD is little closer to being open than it was on Feb 23.
The other issue is if you can't get insurance why would you consider rebuilding.
On Trademe there are currently 1433 properties for rent in Christchurch. This number is no different from what it has been for the last few years. So why is the Gov't spending money on building new temporary accommodation when there is so much rental stock currently available?
Andy, it was 900 6 weeks ago.
Perhaps 10,000-20,000 houses are vacant.
Round the central areas which are normally filled with tenanted properties, house after house lies vacant, some not habitable, a lot just vacant.
In some areas it's easier counting the occupied houses and units than the empty ones.
What are they going to do in Tauranga? Compete against your son for his job? They will. They have to just to get a foot in the door, and everyone elses son and daughter and father and mother in Tauranga. They'll work for less just to get started. What that golng to do for rents in your area when your sons wages fall to match the 'immigrants'?
I love your optimism YL and I so wish you were right... but am afraid most businesses are giving the ol', "it's a tough market out there and you're lucky to have a job," spiel. Most likely a 2% increase again this year, at least 3% less than inflation. Most wage earners are going to find it pretty tough over the next couple of years.
Weird how someone of us see and experience an entirely different city and country to others, yes retail, hospitality and the rental pockets are not in good shape however that is not the whole city. Talk to a group of Christchurch Chartered accountants last week, few of their clients are looking at leaving the city and instead want to get stuck in and rebuild. A new commercial property development on the outskirts of the city will be announced soon..clients wanting to merge titles in the city with the intention to rebuild in the CBD pass in conversations. I really wonder about the towns mentioned in these rental hot spots, except Auckland, how much employment is available to avail yourself of if you are moving into these towns. Look at the numbers shooting through to wanaka..how sustainable is that really or is there a large hidden economy.
I think it is tragic the young are leaving Christchurch, there is so little to do for the 18-24 year age group, should have a beer tent village sorted by now..good grief i agree on the local and central government respose being simply inadequate.
The great unspoken has been how long these aftershocks will continue..have a look at the research it appears we are in for a longer time than most on that count.
Speckles, I find that in groups of their peers, people are being outwardly optimistic. However anyone who is reliant on insurance is inwardly deeply concerned and has no confidence.
Considering IAG (NZI/State etc) is actively trying to cancel renewals on large ChCh landlords (that's not rumour they sent our broker an email last week declining to renew our cover, which of course we will bring to the full attention of the media and Govt if not resolved), then how does anyone have any confidence to rebuild if insurance is not forthcoming, tenants are thin on the ground and consumers in exodus.
There is a subsection of the business community who are of the view that everything will work out. These are generally people with transportable businesses who don't carry large debt and can control costs by making staff redundant (ie professional service firms like your accountants). Of course they don't realise that it's not business as usual and not just a quiet patch that will recover when things sort themselves out.
Property people are the ones that need to rebuild the city. We own the land, we will (eventually) receive the insurance and we will make decisions based on investment returns. If the tenants aren't here, if insurance companies continue to play hard ball, if civil defence and the Government continue to bully then nothing will happen, building won't occur (like it didn't after Sept) and no recovery will take place.
Any optimism is sadly misplaced.
If you are moving within your peers then its hardly suprising you are getting a different impression....however I am pleased your peer group is positive...my vry limited impression is ChCh will never really recover....which then has to make we ponder about Wgtn.......
Young leaving, I think they always have from NZ and done OE's and some wont come back....its a great place to bring up little kids, but once into early adulthood NZ is lacking IMHO....same effect from my home town in the UK....if you wanted work and to get ahead you had to leave....
regards
I have heard to that the insurance companies do not want to insurer some sections of CHC as they are of to high a risk. How can one rebuild in those areas (my mother is in one of them) if they can't get insurance, no insurance no mortgage....some of the areas should of never been built on anyway so think it is time to Government faces this issue, starts a sub division and relocates these sections. (I have heard, and it is only a rumor, that they are looking at around 400 hectares west of Hei hei).
Another Problem a number of these poorer areas is that some of them brought there house 20 years back for about 30K, only had insurance cover for 30K, house is gone, there is no way they can re build for 30k, a number of elderly will be in this position no doubt
Nicholas A, think people arriving from Chch to places like Tauranga just reflects their desire to get away from Chch. Posssibly they have friends or family there. Not sure how that subsequently plays out, and yes they will look for jobs but evidently in Tauranga there are lots of retail chains/ supermarkets etc currently opening up, so may be jobs available.
My son has an IT business so they will not be competing for jobs with him
I agree. It's 'escape mode' at the moment. That's what happens when something unexpected happens. But people have to eat and pay for rent and petrol. Yes; we have a welfare support system to stop people starving in the gutter, but most people who 'go' to Tauranga will either (1) Go 'home' or to another place where work is, eventually or (2) stay there, and compete in your marketplace for your jobs and use the facilities that your community has spent decades establishing. And just wait and see. If your son is in IT, that's one of the few portable skills that can move with an immigrant. Competition for him arrived in Tauranga just recently, and is probably staying in one of your rentals - right this very minute!
You're right that IT is a portable skill Nicolas, however the good thing about it is also that you don't have to limit yourself to working for local companies. We work on projects for various people, including some in Auckland, Australia, New Caledonia...and we live in a small town in North Canterbury.
It's amazing what you can do with technology these days, location (yours and your customers') is not an obstacle (so long as you can find the contacts/get the work, which is probably the tricky part but that said, there's no shortage of opportunities, well for now anyway, touch wood).
I don't doubt you, Elley. My original point was rather more general than specific to IT :). Muzza's 'son' was meant to represent 'any worker' in Tauranga. And I still maintain, that many Christchurch refugees will have to do 'something', even anything, to earn a living wherever they go. And those jobs will, in all likelyhood, be ones that someone in 'Tauranga' is already doing. The new-comers will compete with the established workers for what jobs there are. That will push down wages, and thereby, rents.
Yes, I have decided to invest in Tauranga, there are big port developments going through the submission process at the moment, and a 6,000 student development by Waikato university kicking in 2013. 2 new schools just opened this year in Papamoa, and in the past few years a new Catholic College (Aquinas) with a roll I think of 750, and a Christian College (Bethlehem College ) with a roll of 1,500. The State schools are huge, 3 of them around 1,700 -2,000 each, and there are 2 Teacher's Colleges plus International schools catering for overseas, especially Asian, students now. Tourism is on the up with 183 cruise liners already booked for next season. So not a problem with people arriving from Chch, there are hundreds of new arrivals each week anyway. This actually creates a growth cycle, looking for jobs is only a competition issue in a stagnant or declining pool of work opportunities. Last month I was taken on a business tour by Priority One in the area and companies like Port of Tauranga, Zespri, and Comvita gave presentations about developments taking place, all very positive. It is an area of good potential, plus a pretty nice climate and environment , Mount Beach is probably world class, and my son is keen on the surf ; along with fishing- very good around Mayor Island.
"Housing should not exceed 3 times household incomes"
Im sorry Hugh, but just because you keep saying it soesnt mean its going to come true.
Until such time as Kiwis accept smaller houses built to a lesser level of finish then I dont see that number going any lower than 5 x.
Prescient, Kermit! Just like they will get used to smaller cars rather than the 'family V8 Holden'. Families are getting smaller ( goes back to the '60's and The Pill!), and older-and-smaller. That's when the ratio comes back into line. Starting to happen....from 2011.....Becasue not only does the need for a larger house diminish with age, but that 'household income' amount falls in tandem.
Not sure the theory meets practice on that one NA.
Once people have a taste for something (ie extra bedroom, ensuite, 2nd living area, nice car etc etc) they will fight pretty hard to keep it. So I dont see down-trading en-masse...certainly not to the 100m2 3 brm fibrolite boxes we used to see everywhere, which is what will need to happen to underpin the 3 x argument.
There is also the view that whilst you need to plan for the future you also need to have some enjoyment of life today.
I also dont buy your argument that the whole country is going to go flatting with each other which will lead to a glut of houses.
I think you are right on this. Our neighbours, a lovely retired couple, have just moved in into their newly built house. Four bedrooms, 2 bathrooms, 2 living areas, triple garage, extra other rooms and basically half of it is unused most of the time. That said, it is a very nice house, they enjoy it and will probably re-sell it more easily than if they had built a retirement unit (did I mention the approx 150m2 shed for the boat, tractor, digger, caravan etc?!). It's only an anecdotal example but I know they're not the only retired couple wanting to live in a large house.
We did build a big house too but then again, we have 4 1/2 children and both work from home which means office space required so all the space is used. Not sure what we'll do once the kids leave. To be honest, I don't think we'll want to move until we have to, might turn it into a B&B at some point, or at least get someone to do all that vacuuming :)
I don't mind what people fight for, Kermit. As long as they can afford it, they can do whatever they like! But tastes and needs change with life. They are, and they will, especially in the economy I see about me, and I don't see a change for the financial better coming to New Zealand anytime soon. Ergo, my views.....
(PS: Re Elleys above post. The last two house we sold in Canterbury BOTH went to aging singleton couples. What they wanted 10 acre 'life sentence' blocks for is beyond me! At least we had the children and the horses etc.)
KTF, NA
From WWII and during the 1950's a large proportion of new housing development was "state houses" of the 2 x bedroom variety and about 800 sq.ft or about 80 square metres. The 1960's was the era of the mass "group home" builders such as Reid Homes and Dempsey Morton etc which were 1000-1100 sq ft or 110 square metres. Any house of more than 110 sqm built by anyone other than a group home builder cost more than 3 x average income. In 1960 a family member who lived in a 2 x bedroom "state house" was encouraged to buy it from the state but opted out because it was 6 x income. While it has been published here in these columns that Gareth Morgan claims house prices were 3 x income in the 1970's I disbelieve that. Within 15 klicks of AKL CBD that is.
Well I don't see chartered accountants as my peers. lol I mentioned their comments as they deal with a broader cross sectional base of people in the business community which includes property investors and people living out east christchurch, they are nothing without their clients which is their entire focus currently.
With my own clients I'm seeing positive commercial actions not just words includes substantial property investors.
Just adding, on occassion, a wider persepective which gets lost here.
I want to support all that have to deal with insurance, I'm actually acutely aware of the issues however I also want to get out the message that a lot of business are working effectively in the city.
There is no doubt Christchurch will decline and from my personal perspective Detroit and some of its population dynamics comes to mind, that is a given, but not the end of the story.
Immediately after the earthquakes I was thinking about Christchurch as possibly going the same way as Detroit. Not in terms of the decline of a specific industry, but in broader terms of the earthquake as an event triggering a slow leakage of population, wealth and industry, and Christchurch surviving as a depopulated shell of a city that was formerly much more prosperous. But if it happens, it will probably be a fairly slow process. Partly it's because a few days earlier I'd stumbled across a photo-essay of formerly grand derelict buildings in Detroit. Wish I had a link for you, because it was fascinating. Huge baroque ballrooms, banking chambers, hotels, apartment buildings, mansions and railway stations, obviously very expensive when built, with the best of materials and workmanship, but they've been sitting empty for years, sometimes decades.
Wasn't it similar here? , iconoclast. (reply in wrong spot!)
"Prior to the financial deregulation of the mid-1980s, bank mortgage lending was heavily regulated. Interest rate controls were in place and bank loans were rationed and only available to the most creditworthy of borrowers. Banks were restricted to lending up to 80 per cent of a property’s valuation (and, from my memory, ony 33% of Gross Income could be apportioned against mortgage payments ie: 3 times) and the female partner’s income was not considered when calculating a borrower’s repayment capacity. Interest rate ceilings were also imposed on both bank loans and deposits.In the first half of the 1980s, regulations that undermined efficiency, such as interest rate controls and lending restrictions, were abolished."
"the female partner’s income was not considered "... That's interesting. I'm wondering what their reasoning was. Was parenting considered a full-time job then? Funny how things have changed, now mums are considered lazy if they don't go back to work by the time the kids turn 5, or even 1.
It is an ill wind that blows nobody any good.......
Our property bubble has involved large numbers of investment properties being bought with capital gains in mind, rather than potential rental returns. Possibly 1 in 10 investment properties in NZ has been empty for a while.
People moving out of ChCh looking for homes to rent.......... if you're a Property investor whose business model has come unstuck because of lack of capital gains, boy, are you lucky.
Phil, best to have property that is income-producing, that's why having a beach house is usually a waste of capital, especially when the capital value goes southward. Also, any negatively geared property is as bad, it doesn't earn anything (and tax write-offs were more illusionary as one only got back $1 for every $3 spent and depreciation was always subject to a claw back on point of sale). If you sell a property and make a good capital gain then that is a bonus, nothing more. The aim of financial independence is to have a passive income stream that one can live comfortably off. Some people have invested in property to achieve this, others in various investments, including equities or unfortunately finance companies etc
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