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A nationwide shortage of residential properties for lease has led rental prices higher in many places across the country and there’s no respite in sight, First National’s quarterly property management survey shows. “Rents have increased due to a shortage of rental properties across much of the nation – it’s the basic economic principle of supply and demand,” First National Group General Manager Colleen Milne says. “The situation is unlikely to improve until more properties are available to rent, particularly in the Auckland market,” she says. The survey, for the summer of 2011-12, measures property management vacancy rates, rent rate movement and demand/supply experienced by property managers in the First National network, which covers the length and breadth of New Zealand. Nationally, 46% of First National property management offices say rents in general have increased from a year ago, while 43% say they are the same and 3% report rent decreases. The survey shows 45% of First National respondents record two-bedroom rent rates the same as summer 2010-11, while 41% say rents are higher and 7% say they are down. For three-bedroom properties, 48% of those surveyed say rent rates are up compared with summer last year, 41% say they are the same, and 3% say they are lower. With regards four-bedroom places, 48% of First National property management offices say rent rates are up compared with summer last year, while 41% say they are the same and none indicate rents are lower. Notably, all Auckland offices say rent rates are up across the board. In Auckland the average rent rate for a two-bedroom flat was $312 a week, $320 for a two-bedroom house, $343 for a three-bedroom flat, $400 for a three-bedroom house and $462 for a four-bedroom house. The highest rate was $580 per week for a four-bedroom house in Howick and $370 per week for a three-bedroom house in Glendene. Wayne Boberg, from First National Bobergs in Epsom, Auckland, says February was insanely busy and March has been hectic for his property management team. He says the main factor behind the rent rises is the lack of new construction in Auckland. “There is no finance available for development or developers in the current economic climate after the demise of the finance company sector. On top of that, red tape with council consents and the cost of planning approval are anything but an incentive to build,” Boberg says. LOW YIELDS ONE COMPONENT OF LANDLORD RELUCTANCE “At the same time, the returns landlords can achieve with development don’t justify their investment. There’s little incentive to be an active landlord anymore,” he says. “When gross yields of 4.5% or 5% are the norm (3.6% or 4% net), it is more attractive for many people to leave their money in the bank.” Next month’s law changes mean depreciation can no longer be claimed on investment properties. “This has had a cumulative effect of making it difficult for new landlords to enter the market and for existing investors to grow their property portfolio, while keeping reluctant landlords in a holding pattern because they would have to pay back the depreciation if they sell,” Boberg says. “There’s a gradual creep towards more people renting versus owning a home as people can’t afford to buy and the population of Auckland is growing, but there is no new development providing the accommodation for the increasing population. On top of that as more people move out of the central city, from the expensive central areas, their transport costs rise as they commute further and further to work. “These problems are not easily solved and rents will continue to rise in the meantime,” Boberg says. “We’ll end up like Sydney before too long – always difficult to find a place and remarkably expensive.” Ilam in Christchurch was the most expensive in the South Island with an average four-bedroom home renting for $450 per week and $390 per week being charged for an average three-bedroom house. QUAKE CRUNCH IMPACTS First National Giera Progressive Principal Joe Mullins says his Ilam agency has been inundated with multiple applications for every rental property on the market for the last three months. Between relocating families from the eastern side of Christchurch due to earthquake damage and firms of tradespeople looking for accommodation for their rebuild staff, there is increasing competition for vacant properties, Mullins says. It’s cheaper for construction companies to rent a house for their staff than pay motel rates so they are competing with families for properties. There’s little chance of success for those people searching for short-term leases while their houses are being repaired. “Rents are rising after three years of stable prices,” Mullins says. “Another consequence is that without question a higher proportion of leases are being renewed as people realise their choices are limited in the current situation.” The available rental stock is stable or even declining as landlords take a capital gain in the present market. “Homes for sale on the western side of Christchurch are rarely being bought by investors because the indicative prices are too high for the anticipated return to be attractive,” Mullins says. “Many homeowners with earthquake-damaged properties are choosing to buy existing houses rather than build again because it is easier. So any investors who are in the market are put off by the competition and prices in this area. “Unfortunately there’s no real solution to the problem unless landlord investors are prepared to accept a lower rate of return,” Mullins says. All of the upper South Island offices say rent rates are up across the board. The average for a two-bedroom flat was $220 per week, a two-bedroom house $265 per week, $275 for a three-bedroom flat, $315 for a three-bedroom house and $357 for a four-bedroom house. In contrast, Cromwell noted that rents are down on two- and three-bedroom properties. NOT ENOUGH PROPERTIES TO MEET RENTAL DEMAND According to 47% of First National survey respondents, there are not enough available rental properties to meet tenant demand. For 28% of respondents, there is a good balance between supply and demand, while 6% of property managers report an oversupply. Families are currently the most active tenants in the rental market, according to 89% of First National property management offices. Young professionals are the most frequent applicants for 11% of offices. The survey shows 50% of respondents nationally say there is a shortage of high-end properties of all sizes, 56% report a shortage of all mid-priced properties, and 36% note a shortage of all lower-end properties. All offices in the Auckland region noted shortages across the board except for Howick, which shows a balance of supply and demand across the majority of styles. The national average vacancy rate for First National properties under management is 5%, an improvement on 7% in October and 7% in July 2011, the survey shows. The lowest vacancy rates are in Papakura, Glendene, Howick, Te Kuiti and Ilam in Christchurch. Those offices all report vacancy rates below 1%. Motueka has a vacancy rate below 2%. The highest vacancy rates are in Mangawhai (17%), Bethlehem in Tauranga (12%), Stratford (9%), Dargaville (12%), Whangarei (7%) and Papatoetoe (7%). Waihi Beach has a vacancy rate of 48% which can be attributed to a large proportion of properties under management being holiday lets.

City dwellers’ dreams to capture a slice of country life are being restricted by a shortage of listings despite excellent interest rates bolstering purchasers’ borrowing power, according to First National’s quarterly rural property survey.  First National Group Chairman Jill Quaid says, “Many people must have had a move to a lifestyle block high on their wish list for 2012 as there has been a notable increase in enquiry from interested buyers since the beginning of the year. “The difficulty is there is a shortage of places for these keen buyers to consider, even though interest rates remain at record lows and banks are providing a supportive lending environment.” Overall listings for rural properties across the First National network are down 14% from the previous survey in September. Listings in the lifestyle sector fell 16% in that time. The popular lifestyle areas of Rotorua and Cambridge are bucking this trend, showing an increase in the number of listings. Horticultural and grazing land were the only rural categories to report an increase in listings in the summer compared with September, rising 81% and 12% respectively. Categories where listings fell alongside the drop in lifestyle properties for sale were dairy, arable land, finishing land and bare land. Regions where buyer enquiry has risen this summer include Southland, the central North Island, and the Bay of Plenty. Demand has also increased in Canterbury, but purchasers’ nerves are still evident amidst the continual shakes being experienced around Christchurch as people search for new living options when their post-quake home situations are finalised. The survey, which measures listing levels, sales, market trends and overall activity across First National’s nationwide network of rural realtors, shows sales in the last three months are markedly lower in the lifestyle sector compared with the previous quarter. “Vendors are still tending towards being overly optimistic with their price expectations,” Rotorua rural sales specialist Chris Meban says. “The uncertainty in the world economy is making buyers cautious and they are not extending themselves even though the banks are saying interest rates will remain low. “People are not taking risks as they might have done in better times,” Meban says. He notes there has been increased enquiry for bareland, especially for smaller sections a hectare or less, in the Rotorua region. “In recent years some bare land listings would take three years to sell – it has been a tough sector. The fact that enquiry is up is a promising sign of a boost to the bare land market to come,” Meban says.  In the central North Island, he also notes there’s been an increase in the use of tenders as opposed to auctions because there are fewer cash buyers around and tenders allow conditional offers.  Nationally dairy listings fell 43% from September. In the Taranaki region there’s a shortage of dairy farm listings in the popular 60,000-100,000 kg of milk solids sized properties. “The shortage of listings is most likely due to current good dairy payouts together with a good growth and production year. Owners are obviously holding on to their properties for a year or so while things are good,” Allied Farmers Stratford First National Principal Owen Mills says. “At the same time there are more buyers emerging into the market looking to buy dairy land because of good returns, along with very favourable interest rates and a slowly returning confidence,” he says. “Good quality, well located dairy land is selling well and I believe the gap between first quality and second quality farms is widening and this trend will probably continue,” Mills says. “For example,  top quality dairy land in Taranaki will sell for $50,000-$60,000 per hectare, while  land that is not so well located or not so well contoured is selling more at $30,000 to $38,000 per hectare. “Buyers are genuinely being more selective and favouring better quality land as management of hillier, contoured land is more challenging,“ he says. In Marlborough, the low returns for grapes are influencing the market as buyers are reluctant to commit to a purchase when the prospects are grim. In Te Puke PSA’s influence on the kiwifruit industry has been disastrous, but new rateable values for properties in the area are assisting with a correction to prices. The outlook for lifestyle properties differs depending on the region. There are good buying opportunities for those looking to move into the lifestyle sector in Southland. First National’s Otaki office reports more people are buying bare land and building a home as existing, quality lifestyle properties are few and far between. In Richmond and Blenheim sellers are advised to consider all offers and not to put their property on the market unless they are prepared to meet purchasers’ expectations. NB: Invercargill is a new office for First National. It opened in January.

One in five First National Real Estate offices had buyer or rental tenant enquiries from recent immigrants in November, while considerably fewer people intending to leave New Zealand listed their home for sale or concluded tenancies, according to the nationwide group’s monthly residential property survey. First National Group general manager John Stewart says, “Much has been reported recently about there being more departures than inbound migrants, but our network’s experience is that more recent arrivals are active in the market then those looking to depart. “Perhaps I am speculating, but  it may just be that a larger proportion of those departing are not property owners, while the skills and or higher net worth that immigrants typically bring sees them better able to purchase,” Stewart adds. “After a relatively quiet October, the usual and eagerly anticipated lift in vendor requests for appraisals and subsequent listings shown in our survey this month is usual for this time of the year,” Stewart says.  “However, in most areas, buyers are frustrated by the limited numbers of good listings and they are regularly ‘fighting’ over the better properties, disregarding those less appealing or priced on the high side. “Many people who sought appraisals in November consequently indicated they are not yet sure now is the right time to sell, reflecting again a general lack of confidence in the economy at large,” Stewart says. “We know that if you sell and buy on the same market, there’s little if any effect. Nonetheless, seller equity is eroded at times like this and we certainly hear that concern often, as no doubt do the banks when considering subsequent loan applications.” The survey, which measures listing levels, sales, market trends and overall activity across First National’s nationwide network, found price norms were generally lower in November compared with a year earlier across almost half of the country, a marked deterioration from October when a similar proportion reported prices were consistent with a year earlier. As has been the case for some time, parts of the Auckland market are bucking that trend, with First National offices in Glendene, Manukau and Papatoetoe reporting prices have increased across all sized properties. Christchurch, Timaru and Ashburton First National offices share that view across medium to large sized homes particularly, as do Gore and Papakura. Over 40% of offices report the price drops to be most noted in the two and smaller three bedroom properties, this November compared with last. “Interestingly, while appraisal and listing requests are markedly up over the month, the numbers at open homes and those contacting through email and at our offices seemed to slip back compared with recent months,” Stewart says. This was not the case for First National offices in Manukau and Papakura in the north and Wanaka in the south, which experienced strong increases in all forms of enquiry along with resilience shown in Papatoetoe, Blenheim, Te Kuiti and Tauranga. National sales volumes for November were similar to October. There was notable interest from investors in Howick, Manukau, Alexandra, Blenheim, Motueka, Johnsonville, New Plymouth, Taumarunui and Taupo, but overall that part of the market is still subdued.

Real estate sales increased in October, but buyer enquiry was negatively affected by the Rugby World Cup, school holidays and confidence issues, according to First National’s monthly residential property survey. First National Group general manager John Stewart says, “While confirmed sales rose 17% in October from September, member offices certainly report a drop-off in enquiry in the latter part of the month, mostly in areas directly impacted by the Rugby World Cup. “This trend is exacerbated by the traditional downturn in enquiry due to school holidays and people’s reticence during periods of pessimistic financial news, which in this case is the Greek crisis and its influence on the world economy,” he says. The situation is exemplified by First National Motueka Principal Bob Brereton. “The combination of the Rugby World Cup and school holidays was a perfect storm. We had nine open homes over Labour Weekend and a zero attendance,” Brereton says. Stewart adds, “In the days subsequent to the Rugby World Cup and the school holidays, 37% of First National offices reported a notable lift in enquiry, including Motueka. “However, the increase in confirmed sales over the previous month really reflects business which was well advanced prior to any of these limiting effects,” Stewart says. Mostly, house prices are steady across the market, he says, but smaller homes seem to be under price pressure. The survey, which measures listing levels, sales, market trends and overall activity across First National’s nationwide network, found house prices were consistent in October compared with a year earlier across 46% of the country, which is an improvement from September when 44% of offices reported prices were lower from a year earlier. When commenting specifically about movement in prices for two-bedroom properties, 46% of First National respondents say they are lower than October 2010. Kaitaia, Mangonui, Motueka, Blenheim, Otaki, Greytown, Riverton, Cromwell, Wanaka, Te Awamutu, New Plymouth, Stratford, Hawera and Whangamata say prices are lower across all sized properties. Bucking the trend, Glendene, Ilam (Christchurch) and New Brighton (Christchurch) say prices have increased across all sized properties. According to 54.5% of First National respondents, website enquiry from buyers through the web was lower. This was not the case for First National offices in Howick, Manakau, Golden Bay, Cromwell, Wanaka, Ilam (Christchurch) and New Brighton (Christchurch), which all say enquiry is up across all the avenues of open homes, the web, phone calls and walk-ins. The survey shows 41% of First National respondents had an increase in appraisal requests in October compared with the previous month. Of the appraisals which did not convert to a listing, 68% of First National respondents believe vendors are waiting for a better time to sell. This was predominant in Northland and central North Island offices. 

There’s a nationwide shortage for high-end and mid-priced properties, but rental prices are stable and vacancy rates are consistent with the previous quarter and a year ago, First National’s quarterly property management survey shows. The survey, for the three months to mid-October, measures property management vacancy rates, rent rate movement and demand/supply experienced by property managers in the First National network, which covers the length and breadth of New Zealand. According to 51% of First National survey respondents, there is a good balance between supply and demand. For 41% of respondents, there are not enough available rental properties to meet tenant demand, while 8% of property managers report an oversupply. The survey shows 45% of respondents nationally say there is a shortage of high-end properties of all sizes, 50% report a shortage of all mid-priced properties, and 29% note a shortage of all lower end properties. For the same categories, only 4%, 5% and 13% of respondents, respectively, say there is an oversupply of properties. Two offices report shortages across all properties and price ranges: Ashburton and Waiheke Island. Alexandra, Cromwell, New Brighton (Christchurch), Glendene, Papakura, Hawera and Motueka report a lack of rental properties across the majority of price ranges and number of bedrooms. The survey shows a good balance between supply and demand across the majority of price ranges and number of bedrooms in Ilam (Christchurch), Epsom, Johnsonville, Palmerston North, Mangawhai, Whangarei, Nelson, Blenheim and Te Puke. First National Group General Manager John Stewart says, “As a generalisation, there is real pressure on good property no matter where and or what size. Quality is in demand and in the main not prevalent enough.” While pressure in southern centres is, to a noted degree, driven by displaced or moving Christchurch families, the pressure in Auckland seems to reflect the movement of job seekers from regional and rural centres more than, say, the Rugby World Cup, Stewart says. “Our offices in rural centres alongside burgeoning farming areas noted fewer vacancies, while areas where vacancies are high were typically regional centres where employment prospects are low and the towns service extensive pastoralism, which doesn’t require a large workforce.” The national average vacancy rate for First National properties under management is 7%, the same as the rate in mid-July 2011 and also consistent with 7% in mid-October 2010, the survey shows. The lowest vacancy rates are in Papakura, Howick, Palmerston North, Motueka, Nelson and Ilam (Christchurch), which all report 2% or lower. The highest vacancy rates are in Cromwell (17%), Mangawhai (13%), Taumaranui (13%), and Waihi Beach (49%). The high level vacancy rate in Waihi Beach can be attributed to a large proportion of properties under management being holiday lets and it is currently the off season for holiday rentals. For the majority of First National offices, the survey shows rental prices are stable compared with a year earlier for two, three and four-bedroom properties. However, many rents have increased, particularly for three-bedroom homes. For 47% of First National respondents, two-bedroom rental rates are the same as a year earlier, while 44% say prices are up and 9% report they are down. The survey shows 47% of respondents say three-bedroom rental rates are the same as a year ago and another 47% say prices are higher, while 6% report they are down. Considering four-bedroom houses, 52% of respondents say rental rates are the same when comparing July-September with the same period last year, while 42% note they are up and 6.5% say they are down. Rental rates are up across the board in Ashburton, Ilam (Christchurch), Epsom, Glendene, Waiheke Island, Palmerston North, Nelson, Taupo, Bethlehem and Whangamata, the First National offices report. In the Central Otago region, Cromwell and Alexandra First National offices report that three-bedroom property prices are down, while much further north Cambridge and Waihi Beach both say two-bedroom rent rates are down.

It’s springtime and the traditional surge in the number of homeowners looking to put their homes on the market is upon us if the increase in appraisal requests noted by First National offices across the country is anything to go by. According to First National’s monthly residential property survey, the level of appraisal requests increased for 60% of First National offices in September compared with August and was higher for 55% of respondents compared with a year earlier. First National Group chairman Jill Quaid says, "We always expect appraisal requests to rise in springtime and the significant increase shown this year is an indication that people are more confident in the economic outlook. “As soon as the first springtime flowers appear, it’s traditional for the real estate market to perk up,” she says. “Vendors are preparing for when more buyers enter the market.” First National offices in the upper South Island, New Plymouth, Glendene, Howick, Papatoetoe, Tauranga, Cromwell, Churton Park, Otaki, Mangonui, almost all Canterbury branches and almost all offices in the central North Island say appraisal levels rose from August 2011 and September 2010. “The Canterbury response is indicative of the very slow market in September 2010 after Christchurch was hit by its first large earthquake at the beginning of that month,” Quaid says. Plus September of 2010 had floods, snow and blustery weather in various parts of the country affecting the real estate market. Despite the overall positive increase in appraisal activity in September, property owners in some parts of New Zealand are still holding back from the current market. The survey shows 15% of First National branches experienced a lower number of appraisal requests in September compared with August and 24% report there were fewer requests than a year ago. Also, 25.5% of respondents note that appraisal requests in September are the same as August and 21% report they are on a par with September 2010. Sometimes, a real estate appraisal does not eventuate in a listing. A majority of First National offices, 73%, report that people who do not list their home as a result of an appraisal are holding back for a better time to sell, rather than listing with another agent or being dissatisfied with the valuation price. The survey, which measures listing levels, sales, market trends and overall activity across First National’s nationwide network, found house prices fell in September compared with a year earlier across 44% of the country, which is consistent with August’s 43% annual change figure. The survey found 41% of the sales force say house prices are the same compared with a year earlier, while 15% replied prices are higher. Canterbury branches say prices are higher for nearly all properties compared with September 2010, while Nelson and Glendene buck the trend in their region by reporting rises too. Prices are lower across the board for Albany, Waihi Beach, Te Puke, Whangamata, Te Kuiti, Cambridge, Te Awamutu, Cromwell, Churton Park, Greytown, Dargaville, Whangarei, Mangonui, Blenheim, Golden Bay, Stratford, and New Plymouth. In the September survey, 51% of nationwide First National branches say two-bedroom property prices are lower than September 2010, while 43% say three-bedroom home prices have fallen. The majority of replies for four-bedroom homes, 45%, indicate prices are the same. In terms of enquiry levels, 40% of First National’s sales force say open home attendance levels are higher than September 2010, while 26% report attendance has dropped. For website enquiries, 49% of offices note they are lower, while 38% report that walk-in and phone enquiries are similar to a year earlier. First National branches indicating enquiry levels are up across all avenues are Howick, Tauranga, over half of Canterbury offices, Te Kuiti, Mangonui, Blenheim and Golden Bay. In September, national listings were down 1.6% from August and had fallen 5.6% from September 2010. A majority of respondents, 38%, have noted little investor activity in the rental property market in September, while 28% say investor activity is improving. The majority of offices in the Bay of Plenty and the lower North Island say there is little to no investor activity in the area, while over half of the branches in Northland and 50% of Central region offices report there is some investor activity and improving. Te Kuiti, Alexandra and Gore note investor activity has improved. Looking ahead, Quaid believes the high agricultural returns being achieved by farmers will buoy the rural economy and real estate market in provincial centres, First National’s traditional strength.