National rental vacancy rate doubles

Residential rental property vacancy rates are double what they were last year as house sales continue to dawdle, according to the First National Group.

First National Group’s quarterly survey of its property managers from Northland to Southland shows an overall vacancy rate of over 6%, twice the 3% of January 2010.

First National Group general manager John Stewart said it was unusual to see a national vacancy rate this high in January.

“This level of vacancy is more normal for winter than summer. 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.

“As a generalization, business closures and downsizing in the regional centres has seen people moving to find work but at the same time unable to sell property, leading to their homes being launched privately into the rental market pending that 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.

Regionally, the survey shows a strong Auckland where demand for all types of properties continues to push the vacancy rate to just 0.7%.

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

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

“In the late 1980s and again later in the 1990s similar drifts 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,” Stewart said.

At the other end of the spectrum, Wellington in particular had 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.

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

However at this stage landlords appeared to be waiting it out as rents remained stable, he noted.

The rest of the country had more supply than demand but rents were mostly stable.

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

Marlborough continues to have high vacancy rates due to the ongoing challenges in the viticulture industry and rents had dropped an average 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,” Stewart said.

Across New Zealand, demand for high-end properties increased with shortages of such 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 noted a lift in the house sales market could rapidly reverse rental trends.