Supply UP

The Private Rental Market is in change mode, with very large numbers of rentals coming onto the market, leading to oversupply compared to the last few years in specific Cities, with some of the regional centres yet to be impacted.

The regions with increasing supply include Auckland (20%), Waikato (17%) and Wellington (15%) above long term averages. Bay of Plenty has moved from 25% down to almost equilibrium. This is since a large dip in July.

Market Growth

These charts are looking like a wild panic buy is in place with investors rushing to get in and ignoring basics. If you cannot rent a property, you are completely dependent on interest staying low and capital gains continuing since you will not have income to cover interest, that’s a high risk game.

Auckland Market

Auckland inventory year on year below, shows the direct impact of this level of supply excess. The Black line is this years inventory, compare this level of listings for 2020 with say 2018/19, the two blue lines, it is well up and has been all year. There are almost 5000 (4,885) dwellings for rent, the largest number in the past 5 years at the end of October is last year at 4,234.

The Auckland market may be heading to oversupply for property sale listings, New listings are up 37% for October 2020 compared to October 2019, the highest new listings month in 12 years. Note that this is new listings only, inventory (supply) is actually down 6.8% due to fewer listings in earlier months.

There is no more AirBNB coming onto the market (the Furnished line at the bottom is my estimate of these), so the change in general listings starting in September (Black line) is sudden and significant. (the increase in furnished listings after covid appears to have caused a lot of the spike seen in June -AirBnB?)

Here is an article that points to what could happen in New Zealand if the market continues to run in the same direction:

Reuters reports a successful real estate agent is dealing with"a landlord who’s selling a portfolio of homes in Columbus’s low-income neighborhood of Linden. Non-paying tenants in those properties have been getting eviction notices.” The Americans have bigger problems with unemployment than us, but if the conditions get tougher in NZ, the market will turn bad in the poorer neighbourhoods for investors. Beware of investing in low income areas at present.

One last point from an interview I heard from the ANZ chief economist Sharon Zollner about the Truckometer, interesting, but not conclusive. I have found the data so may include it in future, but am yet to draw a conclusion. Here is a chart comparing the “Truckometer" with my “Listometer”- similar?

Jonette 2011