Despite what is going on at a global level, the local rental market here in Canterbury has remained somewhat consistent with what we saw late last year.
The overall theme of lack of supply and increased rent pressures, still dominates...more about the local market later.
Nationally there has been significant pressures on rents, my take is that there are many factors that have led to the recent increases. When you sift through them the underlying main cause, as I have said before, is supply and demand.
Why a supply issue?
A lot of investors have sold or stopped investing due to a number of reasons
- there has been a push from Central Government to ostracise landlords and property investors
- the loss of tax deductibility
- increased costs with Healthy Homes compliance and a red-hot market, fuelled by record low interest rates
All these factors brewing quickly, made for a perfect storm.
Long term buy and hold investments always stand the sands of time and what we have seen recently reconfirms that. Those that curtailed to Govt. pressure and sold or didn’t invest, have missed out on some of the largest capital gains and rent increases that the market has experienced for quite some time.
The 10 year rule for property investment really does keep cycling round, even with an Earthquake and a global pandemic. Let’s see what 2030 brings, I’d say that will be another great year to invest.
With the pressure on supply, rents will keep on trending North. From 12 August 2020, rent increases have been limited to once every 12 months. This was a change from once every 180 days (six months). For fixed-term and periodic tenancies, landlords can only increase the rent 12 months after the date the tenancy started and provided the increase is not within 12 months from when the last increase took effect. While we have seen appropriate increases and still look to increase where possible, the market will only tolerate so much as people cannot afford to pay.
In early February the Govt. floated the prospect of introducing rent controls, they thankfully, abandoned the idea reasonably promptly. In tentatively raising the idea, Associate Minister for Housing Poto Williams pointed out the need for policy solutions to the problem of rapidly rising housing costs. However, Prime Minister, Jacinda Ardern, adamantly stated, “We are not considering rent controls.” There will undoubtedly be some disappointment at this from renters. In the year to September 2021, rental rates rose between 3.2 per cent and 7.8 per cent, while annual wage growth was just 2.6 per cent.
Towards the end of 2021, the Credit Contracts and Consumer Finance Act (CCCFA) certainly put the brakes on more than an average amount of first home buyer’s plans and that is still the case now. This leads to the continued need for rental housing, giving the demand for supply, no room to move.
So today in Christchurch, across all property types, there are only 630 properties available for rent. That may sound like a lot but really when you take a look at the long-term averages, that is less than half what would be “normal” supply.
What is popular in the current market?
I like to say that there is a place for everyone. However, Kiwis still like their backyard, so stand-alone homes still reign supreme, with three bedrooms by far the renters choice at the moment. So many two bedroom units/townhouses with no garage have been built, that we now have an oversupply so these are taking longer to rent.
As we all navigate the uncertainties around Covid and the disruption it causes to our personal/professional lives and our businesses, we at A1 Property Managers want to assure you of our continued commitment to the level of service that you have come to expect of us. We have business continuity plans in place to minimise the impact of the disruption that will be caused when Covid finds its way into our business. The most important thing is to keep everyone’s health and wellbeing at front of mind. We have communicated extensively with our tenant community to ensure that we and our tradies are not interrupting their isolation periods. This remains a constantly changing picture and we continue to assess this daily.
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 chat and are happy to share our experience and knowledge wherever we can be helpful.
An active investor for over 25 years & qualified builder, property has always been a part of life. Hamish has sat on the committee of the Canterbury Property Investors Association including two years as President.