Renting getting less affordable in city
Christchurch rents are rising more rapidly than almost every other main centre, denting its reputation as one of the most affordable cities in the country for tenants.
While Ōtautahi was once considered the most affordable major centre for housing, that is no longer the case, with Auckland, Wellington and Hamilton all relatively cheaper to rent in.
Trade Me’s latest rental price index showed the biggest price leap in the country was for three to four bedroom properties in Christchurch, which has risen 12% in the last year to $650 a week.
January’s index showed weekly rent for Christchurch apartments and townhouses reached a median of $450, up 13% on the same time last year. Canterbury’s median weekly rent in February was $565, and Christchurch’s $560. This compared to $720 in Wellington, $650 in Auckland and $550 in Hamilton.
A year earlier, the median rent in Canterbury was $520, and Christchurch’s was $510, compared with $695 in Wellington, $620 in Auckland and $530 in Hamilton.
Nationwide, rents have climbed for the third consecutive month, up 2% on January, reaching a national median of $640 a week.
Median prices for 1-2 and 3-4 bedroom homes reached all-time highs in February across the main centres, peaking at $550 for 1-2 bedroom properties, up 10% year on year, while 3-4 bedroom properties rose by 7% to $720 per week.
Christchurch was the second most expensive major city for rentals, relative to income, level with Dunedin, according to CoreLogic’s latest housing affordability report, which covers the three months to December. The only major city where rent absorbs more of the average income is Tauranga.
“The simple point is average Christchurch rents are 22% of average household income, more than Wellington at 18%, Hamilton 20% and Auckland 19%,” CoreLogic chief property economist Kelvin Davidson said. “You sort of have to take it at face value and say Christchurch is relatively expensive to be a renter.”
Among those struggling to find a rental property is building apprentice Nic Daniels, who believes the market in Christchurch has “gone a bit nuts”.
Daniels, who has been searching for two months and is meanwhile living between his parents’ house and with his girlfriend, said part of the problem was the perception a group of four young men would be bad tenants, despite all having “excellent references”.
The other issue was swiftly increasing asking prices, with “houses that had been around $700 a week bumping up to more like $800 in the Riccarton-Ilam area”.
Many of the properties were not well maintained, Daniels said.
“In a sense, it’s turning into a Dunedin situation, where landlords know someone’s going to take it and not care about the quality of the property.”
Daniels and his flatmates were forced to put a deposit on their previous flat five months in advance, such was the competition for properties.
University of Otago researcher Dr Lucy Telfar-Barnard said some of the current data was conflicting, creating a confusing overall picture.
She said rent to income ratio affordability rankings can be distorted in Dunedin, for example, where students may have rents subsidised by their parents.
Christchurch rentals prices appeared to be “playing catch-up”, she said, as the city looked to regain its previous position in relation to national prices.
Post-earthquakes, demand pushed rents up, but they later “flat-lined” while continuing upwards in other parts of the country, with Christchurch residents moving out of town at the same time as a construction boom.
But the poor rent income to ratio, which points to rents going up faster than income, is complicated by data like the advertised salary index from job site Seek.
February’s ASI figures show the South Island had the fastest rise in advertised salaries, with Canterbury (6.9% year on year) and the rest of the South Island (5.4%) outpacing both the rest of the country and inflation (4.7%).
While New Zealand housing stock in general is poor, Telfar-Barnard said the proportion of new builds in Christchurch and her own research suggested “relatively speaking,” housing quality wasn't as bad as elsewhere.
Internal and external migration were contributors to the squeeze, but Telfar-Barnard said the real problem was the country “failing to keep up with the needs of our economy”, which required people to come in to fill skill shortages but failing to provide sufficient housing.
Half of households are facing housing affordability “challenges” according to the Greater Christchurch Partnership (GCP), with many of those struggling earning too much to qualify for government support.
The GCP Housing Action Plan also claims the poor condition of rental properties is affecting employer’s ability to attract workers, something the Canterbury Mayoral Forum has taken up as “an area of focus” because of the impact on productivity.
The average asking prices for houses dipped slightly in March as the total number of houses on the market jumped to the highest in nine years, the Real Estate Institute has reported.
The average asking price fell 1.3% to $886,953 during the month after increasing about 1.2% in February, but remained up 2.9% over the year, general manager of marketing Vanessa Williams said.
“We have got a directionless market at the moment when it comes to prices,” Williams said.
The market was looking a “little bit more positive earlier in the year” after three months when asking prices ticked up.
But they had largely remained in a tight band between $860,000 and $890,000 over the past two years, she noted.
“While it's wavered 1% or 2% here and there, it’s really not shifted significantly; it’s been very, very flat.”
The number of new listings was up by almost 24% over the year, with 11,455 properties newly listed for sale in March.
New listings jumped by 30% in Auckland and Wellington when compared with March last year, but ticked up only 10% in Canterbury.
The total number of houses available for sale was now “back to levels not seen since 2015”, the institute said, standing at 33,245 at the end of the month, 13% more than a year ago.
Williams took that as a sign that sellers who might have been waiting for a stronger recovery in house prices had decided instead to “get on with their lives”.
“Seeing average prices fall from above $1m in 2022 was a bitter pill to swallow, but prices have now been stable for quite a period and I think people are saying ‘OK, this is the market now“.
Average asking prices slipped 0.9% in Auckland to $1,065,665 over the month and by the national average of 1.3% in Wellington where they fell to $855,056. But Canterbury bucked the trend with a 0.5% rise to $709,981. Asking prices are up by 4.7% over the year in Canterbury, meaning they have roughly kept pace with inflation.
Williams said Canterbury was a fascinating market as prices had risen at a more sustainable pace than in other parts of the country in the past.
“If people see there’s lots of houses on the market and lots of shoes outside the door, they make think ‘actually, maybe this is a good time to buy’, and maybe that’s what’s happening in Canterbury.”
Asking prices in Wellington are now flat over the year, but Williams said it was worth remembering that prices in the capital were relatively elevated a year ago.
The axe hanging and in some cases now falling over public sector jobs in Wellington meant there would be nervousness in the capital, Williams said.
But there was a real shortage of supply in the city also, with only 1819 properties for sale and that made for the possibility of a volatile local market, she said.
Williams said that, nationwide, it was good to see listings returning and the stock of houses for sale increasing.
Reserve Bank governor Adrian Orr voiced “real concern” in February over whether there were a sufficient number of dwellings being built to cope with the recent surge in immigration.
The IMF’s New Zealand mission chief, Evan Papageorgiou, warned last month that measures to boost the supply of housing were “urgently needed”.