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Wellington's rental pain is Auckland's gain

Rental vacancies remain low in Auckland while Wellington is suffering, and across the country vacancy rates are double the level of last year as house sales continue to dawdle, according to First National Group.

Tuesday, January 25th 2011, 12:00AM 1 Comment

by The Landlord

First National's quarterly survey of its property managers across the country has found an overall vacancy rate of over 6%, twice the 3% figure recorded in January 2010.

"This level for vacancy is more normal for winter than summer," said First National general manager John Stewart.

"However, it reflects the current low sales volumes and restricted migration levels New Zealand is currently experiencing. Volumes of unsold houses becoming rental oversupply is no surprise."

The survey found Auckland was experiencing strong demand for all types of properties, with the vacancy rate at just 0.7%.

"Rents in that city have crept up between 3% and 10% as ex-pats returning home and immigrants from the UK and Asia are fuelling demand."

At the other end of the spectrum Wellington was seeing unusually high vacancy rates.

"Wellington property managers are now reporting the highest vacancy rates in 20 years. It's right across the market but especially in upper end properties and apartments. Contract work being lost to Auckland is one of the main explanations I am hearing for the decrease in executive accommodation required," Stewart said.

"It seems fewer new senior roles of the type and scope that attract population inflow to the capital are being advertised presently."

Stewart said another factor adding to the vacancy figures was business closures and downsizing in regional centres prompting people to move looking for work. While unable to sell property, these people were placing their homes privately into the rental market ahead of a sale.

"Those vacating rentals are placing yet more property onto the tenancy market."

"At the same time, pressure has come on rentals in those areas where increased or stable employment opportunities exist," Stewart said.

The Nelson Tasman region and Bay of Plenty region were also experiencing strong demand consistent for the time of year and anticipated economic activity in the regions.

"In the late 1980s and again later in the 1990s similar drifts to those to those two regions occurred, often based on climate, lifestyle and aspiration rather than real work opportunities. Such movement certainly puts pressure on rentals, existing property for sale and building starts."

Across the rest of the country there was more supply than demand, but rents remained mostly stable.

Rents fell in some types of property in just 14% of locations, but were stable or rising in the remaining 86%.

Marlborough continues to have high vacancy rates due to ongoing challenges in the viticulture industry, with rents having dropped on average between 5-10%.

"Marlborough has had a tough time but due to attractive land prices, there are now some good opportunities for landlords prepared to build with the long term in mind."

Country-wide, demand for high-end properties increased with shortages reported in 67% of locations.

"Landlords would do well to consider raising the standard of their rental property holdings given the higher expectations from potential tenants," Stewart said.

He also said an increase in house sales could quickly reverse rental trends.

« Momentum building in house market, according to ANZOCR unchanged at 3% »

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Comments from our readers

On 26 January 2011 at 10:58 am Tony said:
Once investors realise that residential depreciation has collapsed and no longer available,properties will be dumped around most of the country.A shortage will develop,rents will then increase.Another hidden agenda i have picked up on is Labour if elected will bring in A CAPITAL GAINS TAX to make up for the shortfall in the proposed $10 per week tax bribe.They seem to be up to A BILLION DOLLARS short on their calculations.Remember you read it here first.
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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 4.05 4.49
ANZ Special - 3.55 3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - 3.49 3.55 3.89
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.54 3.54 3.69
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 3.97 4.05 4.39
Kiwibank ▼5.15 4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 ▼4.45 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 ▲3.55 3.89
Sovereign 5.30 3.89 4.05 4.39
Sovereign Special - 3.39 3.55 3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.19 4.35 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.39 3.55 3.89
Wairarapa Building Society ▼5.50 ▼3.95 ▼4.05 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.55 3.99
Median 5.34 3.97 4.05 4.39

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