Lack of rental properties will result in continued strong rents through 2022, the Govt has ruled out rent controls...
Well, here we are - February already, and it would seem the momentum of last year is continuing to drive what is going to be another busy market for renters.
SUPPLY REMAINS LOW
Locally, there is no doubt we are seeing a shortage of supply, with some of the lowest numbers I have seen post-quake. If there were 150 less properties available at the moment, we’d be at those post-quake levels. Why is that relevant you ask? Well, with the quakes being over a decade ago, it helps us understand how demand across the city is tracking with traditional stock levels in an un-interrupted market.
We’d all agree that supply and demand are the main drivers of rent and a definite factor in property prices also. Just as we saw post-quake, the heat has been on rents for the last 14 months here in Christchurch and as supply dries up, we see that pressure continue to build.
RENTS STILL ON THE INCREASE
By in large, the rent freezes of 2020 have all but thawed but some are still playing catch-up. Trademe data suggests that of the main centres, Auckland had the lowest increase with an average of 2.3%. In contrast, Wellington’s average was 5.7% and Christchurch’s was 5.6%.
We’d expect to see rents continue to rise, due to a number of factors – mainly due to first home buyers who are now struggling to gain finance and forced to stay renting for longer thus decreasing rental stocks further plus inflation is due to reach an all time 30 year high and with wages/salaries not keeping up, people just cannot afford to buy their own home at the moment.
Mortgage Lab Chief Executive Rupert Gough estimates the combination of new lending rules has reduced the number of eligible buyers by about 30 per cent.
Our friends at Renters United have called upon the Government to set rent controls that are limited to inflation or 5.9%. This would out strip all the median rises across the country – not such a wise campaign for them to back at the moment. Thankfully, Jacinda has ruled out rent controls for now.
As we know, the cost of providing rental properties, such as mortgage rates, insurance, tax and maintenance, have increased. The cost of getting properties up to the healthy homes standards has proved to be more than originally anticipated for some. So, rents increasing comes as a welcome note to most investors.
WHAT WILL 2022 LOOK LIKE?
The market’s biggest players remain at odds about what the market will do in 2022, and with headwinds and tailwinds both gathering force, there’s no consensus over whether they will send prices heading north or south. I personally think the massive gains of last year will flatten as the heat comes out of the market due to the constraint’s bank lenders are under at the moment.
Even if prices fall 4%, as ANZ are forecasting, that is only giving up 10% of the gain that was made last year, so a win of 35%.
Unless the supply issues resolve themselves, rents are going to remain strong. With the many constraints the building industry is currently facing, we will see the supply tap continue to drip slowly for some time to come.
As always, we do truly appreciate your business and the team and I are always just a phone call away. We are always available for a free chat and are happy to share our experience and knowledge wherever we can be helpful.
Hamish and the Team @A1
Qualified builder + 18 years in the Police + investor = the property guru! Hamish leads a fantastic team, creates an enjoyable workplace and still finds time to shoot skeet and wrangle three young sons.