The effect of disasters on the rental property market
Rent rises in areas affected by Cyclone Gabrielle and the Auckland floods are likely, as that has happened in other rental markets after previous natural disasters, experts say.
In Auckland, about 2766 houses have yellow or red stickers on them after being deemed unsafe by the Auckland Council due to flooding events and the cyclone. In other regions hit hard by Cyclone Gabrielle, the number of properties left uninhabitable is not yet known.
Renters United and 19 other organisations have called for a temporary rent freeze in Auckland.
This was in response to comments from Auckland Property Investors Association president Kristin Sutherland, who suggested rents would rise due to the weather-related reduction in rental supply.
The latest figures from Trade Me show Auckland’s median weekly rent is at a record $630.
This is how previous disasters affected rental markets:
Christchurch earthquakes 2010 and 2011
In Christchurch, 7860 homes were left uninhabitable or red-zoned after the earthquakes, and a further 9100 needed to be rebuilt or had major damage, according to a 2013 Ministry of Business, Innovation and Employment (MBIE) report.
The large-scale loss of housing led to a shortage of rental stock, and a sharp increase in rental demand.
Trade Me Property sales director Gavin Lloyd said rental supply in Christchurch declined continually in the period following the earthquakes, and there was no rise in the number of rentals until 2013.
The website’s figures show median weekly rent remained relatively flat at around $310 to $320 for nine months after the earthquakes, and did not start to increase until November 2011, he said.
But rents rose steadily from that point, and reached $450 by July 2013.
Ray White head of property management Zac Snelling said rents did not increase immediately as many were bound by fixed terms, but when tenancies expired or reviews came up the market had changed.
‘‘They started to increase noticeably when EQC repairs started about six months to a year later after the 2011 earthquake.’’
The spike in rent costs continued for several years until about 2015, Property Brokers general manager of property management David Faulkner said.
‘‘After the impact of the rebuild started to kick in, Christchurch actually ended up with an oversupply, and rents plateaued, and then dropped a bit.’’
Covid pandemic 2020/22
When New Zealand locked down to keep Covid out in March 2020, there was a big drive to get everyone off the streets, and into accommodation.
As part of that, the Government passed urgent legislation which froze rents in existing tenancies, and also put a stop to almost all evictions, for six months. The rent freeze did not apply to new tenancies.
But after the freeze ended the average national rent was 11% higher by the end of that year, according to MBIE rental bond data.
Rents have risen steadily in most parts of the country since, and Trade Me’s latest figures show the national median weekly rent hit an all-time high of $595 in January.
Faulkner said rental markets in Queenstown and Auckland’s CBD
were most impacted by the pandemic, and the measures, such as border closures, taken to combat it.
‘‘Queenstown was hit by the departure of tourists and foreign workers, while Auckland’s CBD was stung by the absence of international students, and both had significant rent reductions.’’
But Queenstown’s popularity as a holiday location means there is now a shortage of rental properties again. In contrast, rents in Auckland’s CBD remain below pre-Covid levels.
Westport floods 2021/22
Westport was hit by devastating floods in 2021, which left 563 houses either red or yellowstickered.
Further flooding, and damage, followed in 2022.
The impact on the town is ongoing, with some homeowners still waiting for repairs to be completed, and the Temporary Accommodation Service still involved in housing displaced families.
Snelling said some rental properties required significant renovations and these were only now being completed, so demand exceeds supply.
‘‘Rents have increased slightly, but it is hard to say whether it is due to the floods, or simply that the demand in Westport has been higher because there was a shortage of rentals anyway, even prior to the flooding.’’